The Finance & Leasing Association has decided not to challenge the Financial Conduct Authority's £9.1bn car finance mis-selling redress scheme, delivering a major win for the regulator. Banks had been preparing a legal challenge within the 28-day deadline set by the FCA, which expires on Monday night, but appear to have succumbed to pressure to resolve the matter.

Lloyds Banking Group, Santander and Barclays had already individually decided not to contest the scheme. The motor finance scandal, which reached the Supreme Court last year, has already forced Britain's biggest banks to set aside billions to cover compensation costs. The FCA cut its overall redress estimate from £11bn to £9.1bn in its scaled-back proposals.

However, the FCA still faces a legal challenge from Consumer Voice, which claims the scheme "systematically under-compensates consumers." Claims management firms believe they can secure higher awards of about £1,500 per claim through court action, compared to the FCA's average payout of £829. If accepted by London's Upper Tribunal, this challenge could delay payments to millions of consumers.