A consumer group is planning a legal challenge to a scheme designed to compensate millions of drivers who were mis-sold motor finance agreements.
Consumer Voice said the City regulator's scheme, which is expected to cost lenders a total of £9.1bn, left "too many people short-changed".
Payouts averaging £829 per person were due to begin this summer, under the Financial Conduct Authority's (FCA's) plans.
But the latest development, which could be one of several legal challenges, may delay those compensation payments.
Alex Neill, co-founder of Consumer Voice, said: "Millions of drivers were overcharged through hidden and unfair commission, yet the FCA's scheme risks leaving many of them missing out on hundreds of pounds they're owed.
"People have already been let down once by lenders. They should not now be let down again by the regulator that is supposed to protect them. The FCA needs to fix the scheme to ensure it delivers fair and lawful compensation for drivers."
The FCA refused to say whether it had been notified of any other legal challenges to the scheme.
"Our scheme is the quickest, fairest way to compensate consumers. It seems contradictory that organisations claiming to represent consumers would seek to delay payouts for millions of people," a spokeswoman for the regulator said.
The vast majority of new cars, and many second-hand ones, are bought with finance agreements.
In 2021, the FCA banned deals where car dealers received commission from lenders, based on the interest rate charged to the customer. These were known as discretionary commission arrangements (DCAs) and were often not disclosed.
The FCA said this provided an incentive for a buyer to be charged higher interest rates than necessary, leaving them paying too much.
The regulator's central compensation scheme allows people to complain and potentially receive compensation for mis-sold deals, without the need for a lawyer or to go through the courts.
Consumer Voice said it would challenge the scheme, arguing that the FCA had decided on too narrow an approach to calculating losses. It said that although 12.1 million agreements would be covered by the compensation scheme, some "4.7 million mis-sold agreements will not be included at all".
It is working alongside lawyers at Courmacs, which is representing more than a million drivers currently seeking payouts via the courts, rather than through the FCA scheme.
Technically, the consumer group would apply to the Upper Tribunal, which is part of the judicial system and is designated to settle legal disputes. Paperwork is expected to be filed to the court on Friday.
The application will ask the tribunal to review the way the scheme has been designed, particularly how compensation was calculated.
Consumer Voice argued that there was no need to delay payouts.
"The [FCA compensation] scheme should still be able to get up and running, while the Tribunal looks urgently at the parts of the rules dealing with redress," it said.
"The aim is to fix the flaws, not to stop compensation."
There has been widespread speculation that others affected by the compensation scheme could challenge it, such as lenders. This would not immediately be made public, and the deadline for any legal challenges is on Monday.
Kevin Durkin, from HD Law, which represented Marcus Johnson, who won his case in the Supreme Court, said: "The current scheme simply does not have the general public's needs at the forefront. While a judicial review may result in a short-term delay, we hope it can deliver a fairer, more equitable outcome for consumers overall.
"Let's hope that any potential delay results in more money in the public's pockets. Short-term pain for long-term gain."
However, not all consumer groups believe a challenge is the best way forward.
"Dragging this through the courts again to try and increase [payouts] will only delay payouts for consumers at a time when many households would welcome the cash," said James Daley, managing director of Fairer Finance.
"Of course, while the end result may be better for consumers, there's no certainty of that."
