The UK's Financial Conduct Authority (FCA) is locked in a legal battle with lenders, including Volkswagen's finance arm and Crédit Agricole, over its £9.1bn car finance redress scheme. The FCA accuses the lenders of making "absurd" arguments that would undermine its powers to impose the industry-wide payout for mis-sold loans involving hidden commissions.

Lenders are challenging the FCA's authority to force compensation, arguing that customer losses should be assessed individually rather than presumed for all affected by undisclosed commissions. The FCA counters that this approach would allow firms to determine their own liability, likening it to "the foxes guard the henhouse."

The dispute has delayed payouts to millions of consumers, with court hearings scheduled for December or February. The FCA estimates the scheme covers over 12 million car loans from 2007-2024, with total payouts projected at £7.5bn plus £1.6bn in costs. If the scheme collapses due to legal challenges, the FCA warns lenders could face £6bn in additional operating costs.