Car loan compensation scheme in the UK is now facing a major legal challenge that could delay payments to millions of drivers. A consumer group has warned the Financial Conduct Authority that it plans to take the matter to court. The group says the £9.1bn redress plan is not fair. It also says it does not fully protect people who were mis-sold car finance. The scheme was created to compensate drivers who paid extra costs due to hidden commission payments between lenders and car dealers from 2007 to 2024. The Financial Conduct Authority has defended the plan. It says the scheme is designed to be fast and fair. The regulator argues that it balances the needs of consumers and lenders. It also warned that legal action could slow down payments to affected drivers. The FCA said it is disappointed that groups claiming to support consumers may delay payouts for millions of people who are waiting for compensation. The consumer group behind the challenge says the scheme is not strong enough. It has worked with a law firm to prepare legal action. The group claims that the regulator focused too much on protecting banks and finance companies. It says this weakened the level of compensation for drivers. It also argues that interest payments have been unfairly limited. According to the group, this reduces the final amount that consumers will receive. The average payout under the scheme is expected to be around £830 per mis-sold loan. The consumer group believes this amount is too low. It says many drivers will still lose hundreds of pounds even after compensation. It also says the scheme has been narrowed in a way that excludes some victims. The group says this creates unfair treatment for many affected customers. The legal challenge is expected to be filed in the upper tribunal if it goes ahead. A judge would then review whether the compensation plan is fair and lawful. The case could become the first time a consumer group has formally challenged a UK regulator over a compensation scheme in court. The group has indicated it may file the case very soon, ahead of an upcoming deadline at the end of April. If the case proceeds, it could delay the start of payouts, which were expected to begin in the summer. The car finance scandal began after it was revealed that many drivers were charged extra fees through hidden commission arrangements. Between 2007 and 2024, car dealers and lenders used payment structures that increased loan costs without clear customer knowledge. This affected millions of car buyers across the UK. Regulators later investigated and confirmed that many agreements were not properly explained to customers. The compensation scheme was created after years of complaints and legal pressure. It is one of the largest financial redress plans linked to consumer lending in the UK. While regulators estimate the total cost at £9.1bn, some industry analysts believe the wider impact on lenders could have been much higher. Early estimates suggested the total exposure could reach up to £44bn, which raised concern across the banking sector. Banks and lenders have already pushed back against parts of the process. Some warned that large payouts could affect financial stability. Government figures also became involved in earlier discussions, showing how politically sensitive the issue has become. The debate has focused on how to balance fair compensation for consumers with the impact on the financial system. Supporters of the challenge say the current plan does not go far enough to protect drivers. They argue that real fairness requires higher payouts and broader eligibility. They also say consumers should not carry the cost of past industry practices that were not properly disclosed. The outcome of the legal challenge could shape how future compensation schemes are designed in the UK. It may also decide how quickly affected drivers receive payments. For now, millions of people are waiting for clarity as both sides prepare for a possible court battle over one of the country’s largest consumer finance scandals.