Millions of drivers in the UK will face delays in receiving compensation for car finance deals due to a suspension of the redress scheme by the Financial Conduct Authority (FCA). Originally, an estimated 12.1 million unfair motor finance agreements were set to receive an average compensation of £829 each, with payouts scheduled to commence this year.
The FCA has now revealed that legal challenges against its redress scheme will be heard by the Upper Tribunal in either December 2026 or February 2027. Lenders are no longer required to calculate or disburse compensation until the legal proceedings are finalized.
If the scheme is upheld and not challenged further, payments are anticipated to start in 2027. However, if the courts overturn the program, the FCA will need to determine the next course of action. The FCA cautioned that if a revised scheme is published and faces additional legal obstacles, compensation could be delayed until 2028 or later.
In the event of the scheme being overturned, lenders may be allowed to address complaints individually through the standard complaints process. Borrowers will have an eight-week window to receive a response from lenders, after which they can escalate their complaint to the Financial Ombudsman Service.
Legal opposition to the FCA’s scheme has been raised by four commercial parties, including Consumer Voice represented by Courmacs Legal, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. The redress scheme pertains to car finance agreements made between April 6, 2007, and November 1, 2024, where the lender paid commission to the broker, expected to cost the industry £9.1 billion.
The FCA specified that mis-selling includes agreements involving discretionary commission arrangements, high commission rates, or undisclosed contractual ties. Despite the scheme’s pause, lenders are obligated to inform drivers if they are not eligible for compensation.
By November 18, 2026, lenders must notify motorists whose agreements commenced on or after April 1, 2014, and were complained about by June 30, 2026. For agreements before April 1, 2013, and complaints lodged by August 31, 2026, lenders must inform drivers of their ineligibility by January 18, 2027.