Millions of drivers in the UK are facing a delay in receiving car finance compensation as the Financial Conduct Authority (FCA) has halted a part of its redress scheme. Initially, the FCA had anticipated that approximately 12.1 million unfair motor finance agreements would be eligible for an average compensation of £829 each, with payments slated to commence this year.
However, the FCA has now disclosed that legal challenges against its redress scheme will be heard by the Upper Tribunal in either December 2026 or February 2027. Consequently, lenders are not obligated to calculate or disburse compensation until the legal proceedings are finalized.
If the redress scheme is upheld and no further appeals are made, payments are expected to start in 2027. In the event of a reversal by the courts, the FCA will need to determine its next steps.
The FCA cautioned that if a revised scheme needs to be published and faces additional legal challenges, compensation may be postponed until 2028 or later. Should the scheme be overturned, lenders may be allowed to address complaints individually through the standard complaints process, with consumers having the option to escalate to the Financial Ombudsman Service after eight weeks of no response.
Four commercial entities, including Consumer Voice, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance, have initiated legal actions against the FCA. The redress scheme applies to car finance agreements taken out between April 6, 2007, and November 1, 2024, involving commission payments from lenders to brokers, with an estimated industry cost of £9.1 billion.
The FCA specified that mis-sold agreements include those with discretionary commission arrangements, high commission rates, or undisclosed contractual ties. Despite the temporary pause in the scheme, lenders are required to notify customers if they are not eligible for compensation.
Lenders must inform motorists by November 18, 2026, if their agreement commenced on or after April 1, 2014, and a complaint was lodged by June 30, 2026. For agreements predating April 1, 2013, and complaints made by August 31, 2026, lenders should inform customers of their ineligibility by January 18, 2027.