Millions of motorists will experience delays in receiving compensation for car finance issues as the UK’s financial regulator has halted part of its redress program. The Financial Conduct Authority (FCA) had initially projected that approximately 12.1 million unfair motor finance agreements could be eligible for an average compensation of £829 each, with payouts originally scheduled to commence this year.
However, the FCA has confirmed that legal challenges against its redress scheme will be heard by the Upper Tribunal in December 2026 or February 2027. Consequently, lenders are not required to calculate or disburse compensation until the legal proceedings reach a conclusion.
Should the scheme be upheld without appeal, payments are anticipated to start in 2027. In the event of the program being overturned by the courts, the FCA will need to determine the next steps.
There is a possibility that compensation could face further delays until 2028 or later if a revised scheme needs to be published and faces additional legal hurdles. If the redress scheme is invalidated, lenders may be allowed to address complaints individually through the standard complaints process. Consumers will have eight weeks to receive a response from lenders before escalating the complaint to the Financial Ombudsman Service.
Legal challenges have been mounted against the FCA by four commercial entities, including Consumer Voice, represented by Courmacs Legal, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance.
The redress scheme applies to car finance agreements taken out between April 6, 2007, and November 1, 2024, where commissions were paid by the lender to the broker, with an estimated industry cost of £9.1 billion. The FCA identified mis-selling scenarios involving discretionary commission arrangements, high rates or undisclosed commissions, and undisclosed contractual ties.
Despite the pause in the scheme, lenders are obligated to inform customers if they are not eligible for compensation. Motorists whose agreements began on or after April 1, 2014, and who lodged a complaint by June 30, 2026, should be notified by November 18, 2026. Those with agreements predating April 1, 2013, and complaints lodged by August 31, 2026, should be informed by January 18, 2027, if they are ineligible for compensation.