The Financial Conduct Authority (FCA) has confirmed that legal challenges to its car finance compensation scheme will be heard by the Upper Tribunal between 16 and 26 February 2027.
An estimated 12.1 million motor finance deals are due compensation worth an average of £829 each, according to the FCA. Payouts had originally been scheduled to begin this year, but the regulator was forced to suspend part of its scheme after a consumer firm and three car finance firms announced legal challenges.
Delays and preparation requirements
The regulator previously said the hearing would take place in either December 2026 or February 2027, so the confirmed date is the later of the two, meaning drivers face a longer wait for the outcome. Until the legal process concludes, lenders do not need to calculate or pay compensation under the scheme, but they must keep preparing for it and progress complaints as far as possible.
If the courts decide to overturn the programme, the FCA previously warned that compensation could be delayed until 2028 or beyond. The FCA said it may also allow lenders to resolve complaints individually using the usual complaints process.
Challenges and consumer response
The redress scheme has been challenged by three lenders – Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – and by Consumer Voice, represented by Courmacs Legal.
Alex Neill, co-founder of consumer rights organisation Consumer Voice, said: “Consumer Voice is ready to take our challenge to trial with a potential hearing date listed for December 2026, which has now had to be abandoned. The final hearing is now listed to take place in February 2027.
“The FCA and lender applicants blame each other for the delay. The FCA’s approach to disclosure has been heavily criticised by all parties whilst the FCA blames the lenders’ requests for extensive disclosure of underlying data and reliance upon fresh expert evidence as the cause of the trial being pushed into next year.”
Scheme scope and notification deadlines
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 £9.1 billion.
The FCA said those who were mis-sold include agreements where there was a discretionary commission arrangement, a high rate of commission, or a contractual tie that the customer was 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.
