October began with a lot of activity behind the scenes around the motor finance compensation scheme. This week, Volkswagen announced that it is setting aside £725 million for potential costs.
This marks a significant change in the company’s position. In 2024, the firm said it was not possible to estimate how much would be spent on the compensation scheme for drivers.
Stellantis, the carmaker behind Vauxhall, Fiat, and Jeep, also stepped forward and set aside a large sum. The company is earmarking a total of £221.3 million, an amount 500% higher than the original estimate of £37.1 million made at the beginning of 2025.
The legal process is under way
The dispute concerns commissions paid by lenders to car dealers and whether customers received enough information about those arrangements. The Financial Conduct Authority’s compensation scheme seeks to address unfair treatment, but challenges to its rules have delayed payments.
The companies announced their provisions as the scheme’s future remains before the courts. A case management session on 5 and 6 October considered the timetable for the full hearing and which documents and expert evidence could be presented. The full hearing is scheduled to begin on 16 February 2027. A judgment could follow one or two months later.
Lenders’ obligation to calculate compensation and make payments under the scheme is on hold while the legal proceedings continue. If the programme is upheld and no appeal follows, the FCA expects payments to begin later in 2027. If all or part of it is overturned, the regulator will have to decide how to proceed, potentially delaying payouts until 2028 or later.
Meanwhile, firms must continue identifying affected customers and gathering the information needed to calculate compensation. This preparation should help payments begin as quickly as possible if the scheme is upheld.
The FCA estimates that its current scheme – which is now under fire – covers 12.1 million agreements, with approximately £7.5 billion in compensation and £1.6 billion in administration costs.
What have other lenders provided?
Other reported provisions include Lloyds Banking Group’s £1.95 billion, Barclays’s £430 million, BMW’s approximately £612 million, Mercedes-Benz’s £424 million and Ford’s £155 million. These figures reflect different businesses and reporting periods, so they should not be treated as a direct measure of what individual customers might receive.
What should drivers do now?
Motorists who took out vehicle finance between 6 April 2007 and 1 November 2024 may be eligible, depending on their agreement and circumstances. Keep documents, check that your lender has your current contact details, and retain any complaint correspondence.
If you have not already done so, use our eligibility checker to see whether your agreement may qualify.
An industry being transformed
Volkswagen and Stellantis illustrate how uncertainty over historical lending practices is already reshaping financial results. For Stellantis, the rapid increase in its provision demonstrates how significantly estimates can change. For Volkswagen, the £725 million charge shows how a substantial redress exposure can overwhelm improving operating performance.
