The UK financial regulator said it will defend its motor finance compensation scheme after a series of legal challenges from lenders and a consumer group.
The Financial Conduct Authority said its aim remains to ensure customers receive compensation quickly while preserving stability in the market, where £39 billion was borrowed in 2024.
Four challenges have been lodged. One comes from Consumer Voice, while lenders Volkswagen Financial Services, Mercedes Benz Financial Services and Credit Agricole Auto Finance have also taken action.
The FCA said: “We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long running and complex issue.”
It added that an industry-wide approach remains the simplest route to compensation, warning that alternatives would be slower and more costly for firms.
Most lenders, including Lloyds Banking Group PLC (LSE:LLOY), have accepted the plan.
The regulator said it had taken a pragmatic approach to implementing a scheme of significant scale, even where compromises were required.
However, it added that the legal actions "create fresh uncertainty for millions of consumers", many of whom have been waiting more than two years for outcomes on complaints.
The FCA said it is now working with lenders and consumer groups to assess next steps, including contingency plans, with further guidance for firms expected next week.
Consumers have been advised to complain directly to lenders rather than use claims firms, which may charge more than 30% of any payout.