The Financial Conduct Authority (FCA) has paused its £9.1 billion car finance redress scheme, delaying compensation for millions of UK drivers who were mis-sold car loans. The pause follows legal challenges from four companies, including the financial services arms of Volkswagen and Mercedes-Benz, the car finance arm of Credit Agricole, and Consumer Voice, a consumer group. They argue the rules are unlawful and have asked the Upper Tribunal to quash the scheme.
Legal Challenges Cause Suspension
The Upper Tribunal has agreed to hear the challenges in December 2026 or February 2027, with a judgment expected in the following months. The FCA stated that the tribunal ordered parts of the scheme to be suspended on terms agreed with the four parties. This means lenders no longer need to calculate or pay compensation, nor inform customers about owed amounts, until the legal process concludes. However, they must continue preparing for the scheme and processing complaints, including informing customers if they are not owed compensation.
Compensation Payments Delayed to 2027
If the courts uphold the scheme and the judgment is not appealed, the FCA expects payments to begin in 2027. If the scheme is overturned, the FCA will decide on next steps, and there will be no industry-wide compensation scheme. The FCA advised concerned customers to complain directly to their lender. The scheme covers car, motorbike, or van finance agreements made between 6 April 2007 and 1 November 2024, where lenders failed to properly disclose important information, breaking laws and FCA rules.
