Legal challenge threatens to delay £9.1bn car‑finance payouts averaging £829 each

TL;DR A legal challenge by Consumer Voice could delay the FCA’s £9.1 bn car‑finance compensation scheme, which would pay an average £829 to about 7.4 million eligible drivers.

Context The FCA banned discretionary commission arrangements (DCAs) in 2021 after finding they hid kickbacks that raised interest rates on car loans. Its compensation framework lets harmed borrowers claim redress without going to court. Consumer Voice argues the scheme’s loss calculation is too narrow, leaving 4.7 million of the 12.1 million covered agreements uncompensated.

Key Facts - The FCA expects the scheme to cost lenders £9.1 billion. - Average compensation is set at £829 per person, with payouts due to start this summer. - Of the 12.1 million finance agreements in scope, 4.7 million mis‑sold deals would be excluded, leaving roughly 7.4 million eligible for redress.

Market reaction Lloyds Banking Group (LLOY.L) – market cap ≈ £30 bn – shares were flat at 0.0 % on the day of the announcement. Barclays (BARC.L) – market cap ≈ £30 bn – slipped 0.4 %. HSBC (HSBA.L) – market cap ≈ £100 bn – edged up 0.2 %. Specialist lender Close Brothers (CBG.L) – market cap ≈ £2.5 bn – fell 0.6 %, while Paragon Banking Group (PAG.L) – market cap ≈ £2.0 bn – rose 0.3 %.

What It Means If the Upper Tribunal sides with Consumer Voice, payouts could be postponed while the scheme’s methodology is reviewed. Lenders may need to extend provisions, affecting short‑term earnings, while eligible drivers would see delayed cash inflows averaging £829 each. The tribunal’s decision could also prompt similar challenges from lenders seeking to limit their exposure.

Watch for the Upper Tribunal’s ruling expected early next month and any subsequent appeals that could shape the final payout timeline.