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If you have made a car finance complaint, or you are considering one, you may have read that compensation under the motor finance redress scheme has been delayed. The reason is a set of four legal challenges brought against the scheme, and an order from the Upper Tribunal suspending parts of it while those challenges are decided.
This guide explains who has challenged the scheme and why, which parts are paused and which are still running, when the challenge is due to be heard, and what the possible outcomes could mean for your complaint. Everything here is drawn from published statements by the Financial Conduct Authority (FCA) and commentary from UK law firms, and we will update this page as the case progresses.
IN THIS GUIDE
- What is the motor finance redress scheme?
- Who is challenging the scheme and why?
- What has been suspended and what is still going ahead
- Upper Tribunal hearing dates
- What could happen next
- Protecting yourself while the scheme is delayed
- Frequently asked questions
What Is the Motor Finance Redress Scheme?
The motor finance redress scheme is an industry-wide compensation scheme set out by the FCA in Policy Statement PS26/3. The FCA published its policy statement in March 2026 and the scheme rules came into effect on 31 March 2026, according to guidance published by the ICAEW. The scheme applies to regulated motor finance agreements taken out between 6 April 2007 and 1 November 2024.
The scheme was split into two parts: one for agreements taken out between 6 April 2007 and 31 March 2014, and another for agreements taken out between 1 April 2014 and 1 November 2024. Under the rules, a lender must presume there was an unfair relationship where a relevant commission arrangement existed and it was not adequately disclosed to the customer.
Relevant arrangements include discretionary commission arrangements (DCAs), which allowed dealers to influence the interest rate and were banned in January 2021, so DCA complaints relate to agreements taken out between 2007 and 2021. The scheme also covers other types of undisclosed commission and contractual ties, which we explain in our guide to the three types of hidden commission in car finance. For a full breakdown of the rules themselves, see PS26/3: the final rules explained.
Who Is Challenging the Car Finance Redress Scheme and Why?
The FCA announced on 1 May 2026 that its scheme had been legally challenged. Four commercial parties have brought challenges to the Upper Tribunal:
- Consumer Voice, represented by Courmacs Legal
- Volkswagen Financial Services
- Mercedes-Benz Financial Services
- Crédit Agricole Auto Finance (CA Auto Finance)
According to the FCA, the applicants argue that the scheme rules are unlawful, either as a whole or in certain parts, and they are asking the Upper Tribunal to quash them. The FCA has said it will defend the scheme robustly as lawful.
Why the challenges pull in different directions
The four challenges do not share the same aim. Consumer Voice argues that the scheme's redress calculation is not generous enough and that payouts should be higher, as reported by MoneySavingExpert. The three lenders are challenging aspects of the rules and their lawfulness, with the aim of excluding or limiting compensation.
WHAT THE FCA SAYS
The FCA has summarised the four challenges as, taken together, claiming that its approach is both unduly favourable to consumers and unduly favourable to lenders.
Source: FCA, Legal challenges to motor finance compensation scheme: update for firms and consumers, May 2026.
Motor Finance Scheme Suspended: What Is Paused and What Is Still Going Ahead
On 2 July 2026, the Upper Tribunal made an order suspending parts of the scheme, on terms agreed between the FCA and the four challengers. The suspension is partial, so some parts of the scheme have stopped while others continue.
What is paused
Lenders are not currently required to calculate or pay redress, or to send communications about compensation owed under the scheme in line with the original timetable. This pause lasts until the Upper Tribunal process concludes.
What lenders must still do
The FCA has confirmed that firms must comply with every rule that has not been suspended. That includes continuing to:
- Identify relevant complaints and agreements
- Gather the data needed to identify commission arrangements and disclosure practices, including information held by brokers
- Respond to complainants who are not owed compensation under the scheme by the relevant scheme deadlines, except where the firm considers the complaint was already out of time when the scheme was made
That last point means some people are receiving letters from their lender now. If you have had a response saying your complaint is not covered, our guide to what to do if your car finance complaint is not covered by the scheme explains the next steps.
If you have already complained
Your complaint stays with your lender while the challenge is heard. Because compensation calculations are paused, you are unlikely to receive an offer under the scheme until the legal process ends. Keep any letters you receive and make a note of the dates on them.
If you have not complained yet
Under the scheme rules as published, consumers who are not contacted by their lender can still complain to their firm by 31 August 2027. That timetable could change depending on the outcome of the challenge. You can complain to your lender directly for free, and you can find out more about how the claims process works or use our tool to find your finance agreement if you no longer have the paperwork.
Upper Tribunal Hearing Dates: When Will the Challenge Be Decided?
The Upper Tribunal has confirmed it will hear the challenges on either 14 to 18 December 2026 or 16 to 26 February 2027. The FCA has said the final dates depend on whether any party applies for further expert opinion or disclosure of information, and whether that application succeeds.
According to law firm CMS, a further case management hearing in early October 2026 is due to decide the scope of expert evidence and disclosure, and the hearing date is likely to be confirmed then. CMS also suggests a judgment could reasonably be expected within six to eight weeks of the hearing ending, although the exact timing is uncertain.
WHEN COULD COMPENSATION BE PAID?
In a letter to the Treasury Committee dated 8 June 2026, FCA Chief Executive Nikhil Rathi said that if the scheme is upheld, payments can be expected to begin in 2027. At a Treasury Committee hearing the same day, a committee member raised the prospect of further delay if the decision were appealed to the Court of Appeal and potentially the Supreme Court.
Source: Stephenson Harwood, What next for the FCA's Motor Finance Compensation Scheme?, 2026.
Our earlier car finance claim timeline set out the scheme's original implementation and payment dates. Those dates no longer apply while the suspension is in place. For the wider history of the investigation, see our FCA car finance investigation timeline.
What Could Happen Next? The Possible Outcomes of the Legal Challenge
Nobody can say with certainty how the Upper Tribunal will rule. Based on published commentary, the outcome is likely to fall into one of three broad routes.
1. The scheme is upheld
If the Tribunal finds the rules lawful, the suspended parts of the scheme would resume. The FCA has said that if the scheme is upheld and the judgment is not appealed, it expects payments under the scheme to begin in 2027.
2. Some or all of the rules are quashed
Stephenson Harwood notes that the Upper Tribunal can quash rules it finds non-compliant but cannot revise the scheme itself, and suggests the FCA may need to consult again on amended rules. CMS reports that the FCA has warned it would need to consider all options carefully if the scheme, or parts of it, were quashed, and that a substantially revised scheme would likely require further consultation.
Because the challenges point in opposite directions, a successful challenge could affect the scheme in different ways. A change to the redress methodology sought by Consumer Voice could alter how compensation is calculated, while the lenders' challenges seek to exclude or limit compensation. You can read how compensation is calculated under the current rules in our guide to the hybrid remedy formula.
3. The decision is appealed
Whichever way the Tribunal rules, an appeal on a point of law could extend the process further before any compensation is paid under the scheme.
Protecting Yourself While Car Finance Compensation Is Delayed
Delays and news coverage can attract scammers. Autotrader advises drivers to watch out for people posing as the FCA, claims management companies or lenders, and notes that genuine compensation schemes will never ask for upfront fees.
The FCA has also set up a taskforce with the Solicitors Regulation Authority, the Advertising Standards Authority and the Information Commissioner's Office to tackle poor handling of motor finance claims by some claims management companies and law firms. A few simple checks can help you stay safe:
- Do not share bank details or passwords with anyone who contacts you unexpectedly about car finance compensation
- Check that any firm you deal with is authorised by searching the FCA Register
- Contact your lender using the details on your agreement or its official website, not details given in an unsolicited message
IMPORTANT INFORMATION
This article is for general information only and does not constitute legal or financial advice. The motor finance redress scheme is subject to an ongoing legal challenge, and the dates, rules and outcomes described here may change. Whether you are owed compensation depends on the details of your individual agreement, and some people will not be owed anything.
Information correct at 24 September 2026.
