The industry body, which represents the UK’s motor finance firms, said it retained “concerns” about aspects of the scheme but had decided against challenging it. The decision follows similar moves from major lenders, accepting FCA plans despite arguing that the level of redress is disproportionate.

Shanika Amarasekara, chief executive of the FLA, said: “We have always been clear that customers who have suffered loss should receive compensation and that a consumer redress scheme is the right way to achieve this.

“The FLA has undertaken a detailed review of the FCA’s proposed scheme in close consultation with our members, alongside internal and external economists and legal counsel.

“As the leading industry trade body, it is our responsibility to consider how regulatory action will affect not only our members and their customers, but also the wider UK lending market, particularly when the scheme is unprecedented in scale and scope, and the impact on the UK economy will be significant.

“We continue to have concerns about aspects of the scheme, but our priority is that a practical solution be reached that ensures timely compensation for consumers while giving the motor finance industry and the wider market clarity and finality on this issue. For those reasons, we will not be challenging the FCA’s current scheme.

“We will continue to engage constructively with the FCA and other stakeholders to support the effective implementation of the scheme.”

When the FCA unveiled the scheme in March, it estimated that payouts would cover roughly 12.1 million mis-sold deals across a range of lenders, averaging £829 each. The total redress is expected to reach around £7.5 billion, based on an assumption that about 75% of eligible consumers will make a claim. Once administrative costs, including handling millions of complaints, are factored in, the overall bill rises to £9.1bn.

The regulator anticipates that millions of claims will be paid out this year, with the vast majority settled by the end of 2027.