1:28 pm, July 2, 2026
Compensation for mis-sold motor finance agreements has moved a step further away today after the UK’s financial regulator suspended key elements of its proposed redress scheme pending a legal challenge.
In a statement, the Financial Conduct Authority (FCA) said that the Upper Tribunal had confirmed it will be hearing legal challenges to the FCA’s scheme on December 14-18, 2026, or February 16-26, 2027. The final date will depend on whether further expert evidence or disclosure requests are made.
The FCA has now confirmed a partial suspension of parts of the compensation scheme by order of the Tribunal. The move will allow 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’, said the FCA.
The watchdog has set out what the partial suspension means for firms and consumers on its website.
As previously reported by Car Dealer, the legal challenges come from Consumer Voice, represented by Courmacs Legal, Volkswagen Financial Services, Mercedes Benz Financial Services, and Credit Agricole Auto Finance.
Despite the suspension, lenders must continue identifying relevant complaints, gathering commission and disclosure data – including information held by brokers – responding to customers who are not due compensation in most cases, and continuing to work with claims management companies and the Financial Ombudsman Service.
However, firms will not have to calculate or pay compensation, or send communications about compensation owed under the scheme, until the Tribunal process has concluded.
The FCA reiterated its belief that the scheme remains the best way to resolve the issue.
It said: ‘Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.’
For consumers, the FCA said that if the scheme survives the legal challenge and no appeal follows, it expects compensation payments to begin during 2027.
If the scheme is overturned, however, the regulator said it may abandon a compensation scheme altogether in favour of requiring lenders to deal with complaints individually under the normal complaints process. This push compensation back until 2028 or beyond.
