Motor finance redress scheme partially suspended while Upper Tribunal sets hearing dates

Worth reviewing: motor finance lenders and brokers

The FCA has confirmed a partial suspension of its motor finance redress scheme following legal challenges from four parties: Consumer Voice (represented by Courmacs Legal), Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance. The Upper Tribunal will hear those challenges on 14 to 18 December 2026 or 16 to 26 February 2027, with the final dates depending on whether parties apply for further expert opinion or disclosure of information.

The practical effect of the suspension is narrow but significant. Firms are not required to calculate or pay redress, or send communications about compensation owed, until the Tribunal process concludes. Firms must keep identifying relevant complaints and agreements, gather data on commission arrangements and disclosure practices (including information held by brokers), and cooperate fully with the Financial Ombudsman Service on any existing complaints already referred to it. Everything else continues.

Two notification deadlines remain live. Firms must tell complainants who are not owed compensation under the scheme by 18 November 2026 (agreements beginning on or after 1 April 2014, where the consumer complained by 30 June 2026) or by 18 January 2027 (agreements beginning before 1 April 2014, where the consumer complains by 31 August 2026). The FCA has said it will not treat a firm as non-compliant if it needs up to seven additional weeks beyond each deadline, given the time taken to agree the suspension terms. These deadlines do not apply where a firm considers a complaint was out of time, or where the complaint involves a contractual tie and the firm relies on the captive lender exception, because both points are themselves part of the legal challenge. The captive lender exception applies where a lender is contractually tied to a specific manufacturer or dealer group and concludes no unfair feature was present. Separately, the FCA expects each of the three lender challengers to contact all of their complainants individually and directly to explain the legal challenge, the partial suspension, and the resulting delay to compensation payments.

The FCA has also issued a contingency planning instruction. Firms must be operationally and financially ready for a scenario in which the scheme is quashed entirely. If the scheme is quashed, complaints revert to the standard individual process: firms would have eight weeks to respond to each one. The FCA expects firms to make the necessary provisions, engage their auditors, and ensure appropriate capital and liquidity for this scenario is held in a UK regulated entity, including UK entities of international groups. The FCA will supervise closely and may impose business restrictions on firms that do not have the right financial resources in place.

If the scheme survives the legal challenge and is not appealed, the FCA expects compensation payments to begin in 2027. If the scheme is overturned, the FCA may instead direct lenders to resolve complaints individually under the usual complaints process, with an eight-week response window per complaint.

The complaint handling pause expired on 31 May 2026; complaints entirely outside the scheme's scope should be progressed in the usual way now. For context, the scheme covers 12.1 million agreements made between 2007 and 2024 involving undisclosed discretionary commission arrangements and other non-transparent commission structures, with average compensation set at around £830 per agreement and a total estimated value of £7.5bn.

Sources

• Motor finance scheme partially suspendedfca.org.uk
• Five to follow july 2026themodernregulator.com