Millions of car finance payouts are in jeopardy after the UK’s financial watchdog indicated its compensation scheme faces significant delays, changes, or even collapse.

This uncertainty stems from four legal challenges against the Financial Conduct Authority (FCA).

The FCA has advised motor finance firms to prepare for the possibility that its redress scheme, which could see an average payout of £829, may not proceed.

The regulator stated that while a hearing date is unclear, these cases are unlikely to be heard before October.

In the meantime, it is in discussions about the “possibility of suspending some elements” of its compensation scheme, while still urging lenders to prepare for payouts.

But the regulator said it was also considering its options should parts of the scheme be quashed by the courts, including proceeding with a revised version or asking lenders to plan for a scenario where “there would be no scheme”.

This could mean lenders need to be ready to respond to complaints from car finance customers individually, rather than under the rules of an industry-wide programme set by the FCA.

“Many people will be frustrated that the legal action will delay payouts due to begin this year,” the FCA said.

“We remain committed to ensuring consumers receive any compensation owed as promptly as possible.”

The FCA set out the final details of its compensation scheme in March, which it estimated could cost the industry about £9.1 billion in total.

It had been expecting millions of claims to be paid out this year and the vast majority settled by the end of 2027.

The financial services arms of carmakers Volkswagen and Mercedes-Benz and the car finance arm of French bank Credit Agricole, as well as Consumer Voice, a group representing consumers, are asking the courts to quash the scheme, arguing the rules are unlawful.

“Between the four separate legal challenges, it is claimed in effect that the FCA’s approach to establishing the schemes has been both unduly favourable to consumers and unduly favourable to lenders,” the watchdog said.

At least one claim alleges that the FCA has breached the rights of lenders under the 1998 Human Rights Act, according to the watchdog.

Despite the uncertainty of the legal cases, the watchdog is still advising consumers to complain directly to their lender if they think they might be owed compensation, which they can do for free using a template letter on its website.

The federal government has increased petrol and diesel prices by nearly Rs15 per litre each for the next week.

In a notification issued on Friday, the Petroleum Division said new fuel rates will come into effect from May 9.

The price of petrol has jumped from Rs399.86 to Rs414.78, while the HSD price increased from Rs399.58 to Rs414.58 per litre.

This marks the third consecutive increase in petrol and diesel prices after cumulative hikes of Rs33.28 on petrol and Rs46.16 on diesel over the previous two weeks.

The government has been reviewing petroleum prices every Friday night amid global oil market volatility linked to the US-Iran conflict.

Global oil prices were up more than 1% on Friday after renewed fighting broke out between the US and Iran, threatening a shaky ceasefire and dashing hopes for progress on reopening the Strait of Hormuz, a key oil and gas transit route.

Brent crude futures were up $1.41, or 1.41%, at $101.47 a barrel as of 0123 GMT. West Texas Intermediate (WTI) US crude futures rose by $1.12, or 1.18%, to $95.93 a barrel. At the market open prices had risen by more than 3%.

Petrol is mainly used by commuters in small vehicles, rickshaws and two-wheelers. Higher fuel prices significantly impact the budgets of middle and lower-middle-class households, who rely on petrol for daily travel.

On the other hand, a significant portion of the transport sector relies on high-speed diesel.

Its price is considered inflationary since it is predominantly used in heavy goods transport vehicles, trucks, buses, trains, and agricultural machinery such as tractors, tube wells, and threshers.

The consumption of high-speed diesel particularly contributes to the increased prices of vegetables and other food items.