The Financial Conduct Authority (FCA) has suspended parts of its compensation scheme for mis-sold car finance, meaning millions of motorists will not receive payouts until at least 2027. The suspension follows legal challenges accepted by the UK's Upper Tribunal, which will hear the case either between December 14 and 18, 2026, or February 16 and 26, 2027.
What the Suspension Means for Motorists
Lenders are no longer required to calculate or pay compensation until the legal process concludes. Firms can continue preparing for the scheme and investigating complaints, but payments are on hold. The FCA stated that the suspension avoids firms carrying out work that could be repeated if the legal challenges succeed. Some consumers will receive certainty sooner, as firms must still inform complainants who are not due compensation, subject to limited exceptions.
Legal Challenges and Timeline
The Upper Tribunal's decision could overturn all or part of the scheme. If upheld and not appealed, the FCA expects payments under the scheme to begin in 2027. The regulator continues to encourage anyone who believes they were treated unfairly under a motor finance agreement to complain directly to their lender.
Industry Reaction
Richard Pinch, senior director in the Banking & Credit Advisory division at Broadstone, said: "The FCA's decision to partially suspend its motor finance redress scheme provides lenders with welcome operational clarity while the legal challenge is resolved. It removes the immediate pressure to calculate and pay compensation, helping firms avoid potentially duplicative work." He added that lenders must continue identifying eligible cases and preparing for a swift response once the Tribunal reaches its decision.
Scope of the Scheme
The compensation scheme covers motorists who were treated unfairly under motor finance agreements taken out between 2007 and 2024. The FCA has previously estimated firms would pay around £7.5 billion in compensation under the scheme. Motorists concerned they may have been affected should submit a complaint directly to their lender rather than paying a claims management company.
