The Financial Conduct Authority (FCA) has announced that the compensation scheme for victims of the UK motor finance scandal has been partially suspended following an order from the Upper Tribunal, a UK court. This suspension comes ahead of a hearing on legal challenges to the scheme, scheduled for either 14-18 December 2026 or 16-26 February 2027.
Partial suspension details
Under the partial suspension, firms are not required to calculate or pay redress, nor send communications about compensation owed under the scheme, until the Upper Tribunal process concludes. However, the FCA stated that firms must still identify relevant complaints and agreements and gather data needed to identify commission arrangements. The regulator explained: "The partial suspension enables 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. It also provides certainty for some consumers sooner, by requiring firms to tell complainants who are not owed compensation, subject to limited exceptions."
Legal challenges and affected parties
Four legal challenges are being brought by Consumer Voice, Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance. The FCA faces lawsuits over the £9.1 billion compensation scheme, which was designed to compensate borrowers who were overcharged for car loans between 2007 and 2024 due to commission payments between lenders and car dealers. The FCA had estimated that affected borrowers would receive an average of £830 each for mis-sold loans.
Timeline and next steps
The FCA expects a judgment "in the following months" after the hearing. Until the legal process concludes, lenders are not required to calculate or pay compensation. The partial suspension aims to balance preparation for the scheme with avoiding unnecessary work if the challenges succeed. The FCA emphasized that this approach provides some certainty for consumers who are not owed compensation, as firms can still inform them promptly.
