The Financial Conduct Authority (FCA) has paused payouts on its £9.1 billion car finance redress scheme, delaying compensation for millions of motorists. The pause follows legal challenges from four companies contesting the scheme's legality.
Legal Challenges Delay Payouts
The UK's Upper Tribunal has agreed to hear the challenges in December 2026 or February 2027, with a judgment expected months later. The financial services arms of Volkswagen, Mercedes-Benz, Credit Agricole, and Consumer Voice argue the rules are unlawful. The FCA confirmed that parts of its motor finance scheme are suspended on agreed terms, meaning lenders no longer need to calculate or pay compensation until the legal process concludes.
Impact on Consumers
An estimated 12.1 million car finance agreements are eligible for redress, averaging £829 per payout. The pause halts payments but requires lenders to continue preparing and progressing complaints. Customers who complained must be informed about the delays. If the scheme is upheld and not appealed, payments could begin in 2027.
Potential Alternatives
If courts overturn the scheme, the FCA may adopt a complaints-led approach. Without an industry-wide scheme, up to 19 million complaints would need individual handling, taking three years and costing lenders £6 billion more. The FCA said it will decide next steps if the programme is overturned.
