The compensation scheme for victims of the UK's motor finance scandal has been partially suspended, the Financial Conduct Authority (FCA) announced, following legal challenges. The Upper Tribunal, a UK court, issued an order suspending parts of the scheme ahead of a hearing scheduled for either 14-18 December 2026 or 16-26 February 2027.
Partial suspension details
The FCA stated that the partial suspension means firms are not required to calculate or pay redress, nor send communications about compensation owed under the scheme, until the Upper Tribunal process concludes. However, firms must still identify relevant complaints and agreements, and gather data to identify commission arrangements.
According to the FCA: "The partial suspension enables firms to keep preparing for the scheme and progress complaints as far as possible, while avoiding work that may need to be repeated if the challenges succeed. It also provides certainty for some consumers sooner, by requiring firms to tell complainants who are not owed compensation, subject to limited exceptions."
Legal challenges and background
Four legal challenges are being brought by Consumer Voice, Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance. The FCA faces four lawsuits over the £9.1 billion compensation scheme for car loan victims.
The scandal involved drivers being overcharged for loans due to commission payments between lenders and car dealers between 2007 and 2024. The FCA had expected to pay aggrieved borrowers an average of £830 for each mis-sold loan.
Impact on consumers
The FCA says a judgment is expected "in the following months" after the hearing. Until the legal process concludes, lenders do not need to calculate or pay compensation to those owed money under the scheme. Consumers will have to wait for further updates as the legal proceedings unfold.
