The Financial Conduct Authority (FCA) has been forced to suspend part of its £9.1 billion car finance redress scheme, delaying payouts for millions of motorists until at least 2027. The UK's Upper Tribunal agreed to hear legal challenges to the scheme in December 2024 or February 2025, ordering a suspension of key components.
Legal Challenges Halt Compensation
Lenders will no longer need to calculate or pay compensation to customers until the legal process concludes. The FCA stated it will decide next steps if the courts overturn the programme. The financial services arms of Volkswagen, Mercedes-Benz, Credit Agricole's car finance unit, and consumer group Consumer Voice are seeking to quash the scheme, arguing the rules are unlawful.
Impact on Motorists
The pause means lenders are not required to inform customers about owed compensation, though they must continue preparing for the scheme and processing complaints, including notifying those not owed money. If the FCA's scheme is upheld without appeal, payments are expected to begin in 2027. Should the courts overturn it, no industry-wide compensation scheme will exist.
