* Mercedes-Benz, VW among four groups challenging FCA
scheme
* FCA tells lenders to prepare for redress scheme being
scrapped
* Car loan mis-selling one of Britain’s costliest
financial scandals
(Writes through with details and context)
LONDON, May 8 (Reuters) – Britain’s financial watchdog
said on Friday a tribunal hearing on legal challenges to its
compensation scheme for mis-sold car loans was unlikely before
October, and told lenders to prepare for a possibility that the
scheme could be scrapped entirely.
Mercedes-Benz and Volkswagen are among
four groups including a consumer group to have challenged a 9.1
billion pound ($12.3 billion) scheme imposed by the Financial
Conduct Authority on the UK motor finance industry for the
mis-selling.
The move was a blow for the regulator, which unveiled its
final compensation scheme earlier this year in an attempt to
draw a line under a 17-year scandal.
Other lenders, including big lenders Lloyds Banking Group
, Barclays and Santander’s UK arm,
accepted the FCA’s revised scheme, after collectively setting
aside billions of pounds to pay affected consumers.
“We are engaging with the Tribunal and those who have
challenged the scheme on the possibility of suspending some
elements of it while retaining those relating to preparatory
work,” the FCA said in Friday’s statement, adding it would
provide another update soon.
Companies should prepare “on a precautionary basis” for a
tribunal decision in mid-November, the FCA noted.
“We recognise the operational strain and uncertainty firms
face. We also acknowledge the frustration of consumers, many of
whom have waited over 2 years for an answer,” the regulator
said.
Firms should continue to prepare for the scheme while also
undertaking contingency planning including for the possibility
of there being no scheme, it added, noting that if the scheme or
parts of it were quashed the regulator would consider all
options.
“Lenders need, therefore, to be operationally and
financially ready for a complaint-led and supervisory approach
to resolve historic liabilities,” it said.
“We recognise the impact this would have on consumers who
may not always complain. This would also impose significant
extra costs on lenders…”
The FCA had hoped the first payments to consumers, estimated
at 830 pounds per vehicle loan agreement, would start this
year.
Lloyds
Barclays
