Millions of UK motorists awaiting compensation for mis-sold car loans will have to wait longer after legal challenges pushed the timeline into next year. The Financial Conduct Authority (FCA) confirmed that challenges to its £9.1 billion motor finance compensation scheme will be heard by the Upper Tribunal between February 16 and February 26, 2027.
Legal challenges delay payout timeline
Regulators had previously indicated that court proceedings could begin as early as December 2026, but procedural disagreements between the parties have delayed the resolution date. The regulatory redress scheme targets drivers who were mis-sold car finance agreements between 2007 and 2024.
An estimated 12.1 million car finance contracts fall within the scheme's scope, with expected payouts averaging £829 per eligible agreement. The total scheme value would amount to £9.1 billion in overall compensation. However, the scheme remains partially suspended pending the outcome of the February 2027 trial, meaning full payouts are on hold until judges reach a final ruling.
Lenders and consumer groups challenge scheme
The legal battle brings together major corporate lenders alongside consumer rights advocates, both challenging the framework from opposing perspectives. Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance are suing to overturn or adjust the FCA's compensation rules.
Advocacy group Consumer Voice is fighting the scheme on behalf of drivers, arguing that the regulator's calculations undervalue claims and could leave consumers short-changed. The decision to abandon the proposed December court date has sparked sharp criticism over who holds responsibility for the hold-up.
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," he added. "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."
FCA tells lenders to prepare for all outcomes
Despite the tribunal delay, the FCA told lenders on Tuesday (12 October) that they must keep preparing for the scheme and progress with complaints as far as possible. However, it added that firms should plan for the possibility that "there may be no motor finance compensation scheme and no complaint handling pause" if the scheme is quashed in court.
The regulator also warned lenders to prepare for every contingency - including the possibility that the tribunal quashes the scheme entirely. In that scenario, the formal pause on complaint handling would be lifted, forcing firms to resolve disputes through standard statutory timelines.
The regulator noted that finance companies are not required to calculate or issue final payouts until legal proceedings conclude. The FCA also cautioned consumers against using third-party Claims Management Companies (CMCs), which often charge up to 36% in fees for claims that can be submitted for free once the scheme is active.
