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The Upper Tribunal has it will hear the legal challenges to our motor finance scheme on 14-18 December 2026 or 16-26 February 2027. The final dates depend on whether any of those involved in the case for further expert opinion or disclosure of information, and whether such application is successful.
The Tribunal has also made an order suspending parts of the scheme on terms agreed by us with the four commercial parties that have challenged (Consumer Voice, represented by Courmacs Legal, Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance).
The partial suspension enables firms to keep preparing for the scheme and progress complaints as far as possible, while avoiding work that may need to be repeated if the challenges succeed. It also provides certainty for some consumers sooner, by requiring firms to tell complainants who are not owed compensation, subject to limited exceptions.
We have set out what the partial suspension means for firms and consumers, including what firms must continue to do and what consumers can expect while the legal challenge is ongoing.
Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.
We said previously we would take a pragmatic approach, recognising the operational strain and uncertainty firms face and the frustration of many of their customers.
The partial suspension confirms that firms are not required to calculate or pay redress, or send communications about compensation owed under the scheme, in line with the scheme timetable until the Upper Tribunal process concludes.
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Identify relevant complaints and agreements.
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Gather the data needed to identify commission arrangements and disclosure practices, including where information is held by brokers.
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Respond to complainants who are not owed compensation under the scheme by the relevant scheme deadlines, except where:
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the firm considers the complaint was out of time when the scheme was made.
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the complaint involves a contractual tie and the firm is relying on the ‘captive lender’ exception to conclude that no unfair feature was present.
This includes complainants whose cases are outside the scope of the scheme and complainants whose cases are within scope but do not have any of the three unfair features required for compensation: a discretionary commission arrangement, a high commission arrangement, or a tied arrangement.
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Tell complainants the outcome of any non-scheme aspects of a mixed complaint, where the complaint covers matters both within and outside the scheme and the firm says they are not owed compensation for the scheme aspects.
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For brokers, provide lenders with requested documents or information, or confirm they do not hold them, within 1 month of the request.
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Work with claims companies to resolve instances where consumers are represented by more than one party.
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Cooperate fully and promptly with the Financial Ombudsman Service on any existing complaints that have been referred to it.
We will supervise firms proportionately and pragmatically, while ensuring they prepare to deliver the scheme and for the possibility that there is no scheme. We expect firms to comply with the rules. However, if a firm needs more time to tell consumers they are not owed compensation under the scheme, we will not treat it as non-compliant or take enforcement action so long as they tell consumers within 7 weeks of the relevant scheme deadline. The additional 7 weeks reflects that it has taken time to agree and refine the details of the suspension.
Firms that remain concerned about meeting our expectations should contact the supervisor who has been handling their redress queries immediately.
The complaint handling pause expired on 31 May. Complaints that are entirely outside the scope of the scheme rules should be progressed in the usual way.
We expect all lenders to keep complainants up to date on the latest developments. Firms should update complainants to explain when the legal challenge will be heard, what the partial suspension means, and the likely impact on the timetable for dealing with complaints and paying any compensation owed. We will provide further resources to help with this and will also publish copies of the legal applications, pleadings and directions made by the Tribunal on our website.
In particular, we expect the three lenders who have challenged the scheme, at a minimum, to contact all of their complainants individually and directly to explain they have issued a legal challenge and the resulting partial suspension to the scheme and delay to compensation payments.
Firms’ contingency planning
As we previously set out, it is prudent for us to supervise lenders against a central planning assumption that in the event the scheme, or parts of it, are quashed, there would be no complaints pause and no motor finance compensation scheme.
We expect firms’ planning for this scenario to be rigorous and thorough. Lenders need, therefore, to be operationally and financially ready for a complaint-led and supervisory approach to resolve historical liabilities, in line with the default statutory timelines. Lenders should make the necessary provisions and engage with their auditors. In particular, firms should ensure that appropriate capital and liquidity for this scenario is maintained in a UK regulated entity, including UK entities of international groups. We will supervise firms closely and take action, including imposing business restrictions, if firms do not have the right financial resources in place.
We are also engaging with the Financial Ombudsman Service, who are making plans to ensure they are ready to deal with the significant uplift in cases they would expect to receive in this scenario.
We encourage firms to engage with us if they have any questions. We will keep our firm webpage updated with the latest information.
The challenge is due to be heard either in December or in February next year, with a judgment expected in the following months. Until the legal process concludes, lenders do not need to calculate or pay compensation to people owed money under the scheme.
If the scheme is upheld, and the judgment isn’t appealed, we expect payments under the scheme to begin in 2027. Lenders would have to follow the scheme rules and we’d supervise them closely to make sure they do. You’d be able to ask the Financial Ombudsman Service to review your lender’s decision if you didn't feel they had followed the scheme rules.
If the scheme is overturned in whole or part, we will need to decide what to do next.
A compensation scheme is the simplest route for consumers and the most efficient way for lenders to put things right. However, if we were to seek views on a revised scheme that could face further legal challenge, and compensation could be delayed until 2028 or beyond.
We want to secure fair compensation for consumers as quickly as possible. So, if the scheme is overturned, we may instead tell lenders to resolve complaints individually under the usual complaints process. Lenders would need to respond within 8 weeks, and you could take your complaint to the Financial Ombudsman Service if you think you haven’t been treated fairly.
If you have complained and are not owed compensation
In the meantime, lenders will need to tell you if you have complained and are not owed compensation under the scheme, unless one of these exceptions applies.
The deadlines below do not apply if your lender considers your complaint is out of time. They also do not apply if your complaint is about a contractual tie and the lender says you are not owed compensation because there were visible links between the lender, manufacturer and franchised dealer, for example, because they shared a common or similar name. This is because the legal challenge includes how the scheme identifies out of time complaints and how the exception to contractual ties works.
If you complained by the relevant date below and you are not owed compensation under the scheme, your lender should tell you by:
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18 November 2026, if your agreement began on or after 1 April 2014 and you complained by 30 June 2026
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18 January 2027, if your agreement began before 1 April 2014 and you complain by 31 August 2026
If you complain after these dates, and you are not owed compensation, your lender should tell you within 5 months of receiving your complaint.
If your lender tells you that you are not owed compensation under the scheme rules or that your case falls outside of the scheme, and you believe it has made a mistake, you should ask your lender to review its decision. If you are still unhappy, you can refer the complaint to the Financial Ombudsman Service. You can also consider whether to pursue a claim through the courts.
If your complaint also covers issues outside the scheme, your lender should still tell you the outcome of that part of your complaint if it finds you are not owed compensation under the scheme.
Claiming car finance compensation
If you haven’t yet complained and you have concerns, you can complain directly to your lender for free – our website explains how to do it and includes the contact details for lenders. You do not need to use a law firm or claims management company (CMC), which may charge you over 30% of any compensation. Don’t sign up to multiple CMCs or law firms as you may be charged multiple fees.
If you signed up with a CMC or law firm and now wish to cancel, you may be asked to pay a fee. That fee must be reasonable and reflect the work done. Most car finance claims are still at an early stage, so you should check any fee demand very carefully.
We and other regulators have seen poor practice from some CMCs and law firms. If you are concerned about how they have handled your claim, you should complain directly to the firm. We have created a template letter to help.
Enquiries
Patrice Weekes: patrice.weekes@fca.org.uk / 020 7066 0156
Tim Lennon: tim.lennon@fca.org.uk / 0207 066 9166
Press: press.office@fca.org.uk / 020 7066 3232
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