Mercedes Benz has launched a legal challenge against the UK financial watchdog's motor finance redress scheme, becoming the first carmaker to contest the compensation plan that could cost the industry £9.1bn.
Legal Action Against the FCA
The financial services arm of the German car giant is set to challenge the scheme, which holds the car finance industry liable for billions in compensation over 'secret' commission agreements between dealers and lenders. Mercedes has set aside £400m for potential payouts.
"Mercedes‑Benz Group can confirm that it has appealed against the FCA's proposed Redress Scheme," the company stated. "Given that this is subject to ongoing legal proceedings, we cannot comment further."
Industry Reactions
This marks the first confirmed challenge from the industry side after major City banks ruled out legal action. Lloyds Banking Group, which has set aside £2bn, said it was "disappointed" but would not challenge the scheme. Santander raised its provisions to £640m, hitting first-quarter profits, and also confirmed it would not contest the plan.
Other carmakers, including Volkswagen Financial Services, which has yet to make provisions, are reportedly preparing to join Mercedes in challenging the scheme, according to Sky News.
Consumer Group Action
While banks step back, compensation claimant group Consumer Voice has confirmed it is launching action against the Financial Conduct Authority (FCA). The group argues the regulator excluded the "vast majority" of complaints by applying the Supreme Court ruling from August 2025 too narrowly. The UK's top court ruled in favour of banks on two out of three cases but left room for a redress scheme after finding one claimant's commission was unfair.
The Finance and Leasing Association, the industry trade body, confirmed it will not challenge the FCA, stating it has "concerns about aspects of the scheme" but prioritises a "practical solution" reached in a "timely" manner.
The FCA maintains its redress scheme is the "quickest, fairest way" to compensate consumers, adding, "It seems contradictory that organisations claiming to represent consumers would seek to delay payouts for millions of people."
