The Financial Conduct Authority (FCA) had previously estimated that around 12.1 million unfair motor finance deals would be due an average of £829 each
Millions of drivers will have to wait longer for car finance compensation after the UK financial watchdog was forced to suspended part of its redress scheme.
The Financial Conduct Authority (FCA) had previously estimated that around 12.1 million unfair motor finance deals would be due an average of £829 each in compensation, with payouts originally planned to begin this year.
But it has now confirmed that the Upper Tribunal will hear legal challenges against its redress scheme in either December 2026 or February 2027. It means lenders will no longer need to calculate or pay compensation until the legal process concludes.
If the scheme is upheld, and the judgment isn’t appealed, payments should begin in 2027. But if the courts decide to overturn the programme, the FCA said it will need to decide what to do next.
It warned that compensation could be delayed until 2028 or beyond if it had to publish a revised scheme, and this went on to face further legal challenges.
If the scheme is overturned, the FCA said it may also allow lenders to resolve complaints individually using the usual complaints process.
Lenders will have eight weeks to respond, after which you could take your complaint to the Financial Ombudsman Service.
Legal challenges have been launched against the FCA from 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 covers car finance agreements taken out between April 6, 2007 and November 1, 2024, where commission was paid by the lender to the broker. It was expected to cost the industry £9.1billion.
The FCA said those who were mis-sold include agreements where there was a discretionary commission arrangement, a high rate or commission, or a contractual tie that you were not properly told about.
Despite the scheme being paused, lenders will still be expected to tell drivers if they are not due compensation.
Lenders must inform motorists by November 18, 2026, if their agreement began on or after April 1, 2014, and they complained by June 30, 2026.
Those whose agreements began before April 1, 2013, and complained by August 31, 2026, should be told by their lender that they are ineligible by January 18, 2027.
