The Upper Tribunal has lengthened its hearing of challenges to the Financial Conduct Authority’s (FCA) motor finance scheme to 16 February to 3 March 2027, from 16 to 26 February.
The FCA said on 26 October that the change leaves the scheme partially suspended, so lenders do not need to calculate or pay compensation until the legal process concludes.
The regulator said the suspension means firms “are not required to calculate or pay redress” in line with the scheme timetable until the Tribunal process ends.
The scheme was challenged by three lenders, Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance, and by Consumer Voice, represented by Courmacs Legal.
The Tribunal suspended parts of the scheme on 2 July on terms the FCA agreed with the four challengers, according to the policy statement for the scheme (PS26/3).
That statement said the scheme would return £7.5bn to consumers, with millions of claims settled in 2026 and the vast majority by the end of 2027.
The timetable has since moved. The FCA had said earlier that the hearing would fall either on 14 to 18 December 2026 or on 16 to 26 February 2027, depending on any applications for expert opinion or disclosure.
If the scheme is upheld and the judgment is not appealed, the FCA expects payments to begin in 2027. Its earlier guidance had acknowledged that the legal action would delay payouts that were due to begin in 2026.
Firms have 7 weeks to send some letters
The suspension is partial. Firms must comply with all rules that are not suspended, including identifying relevant complaints and agreements and gathering data on commission arrangements.
Lenders must also tell some complainants they are not owed compensation. The FCA said it would not take enforcement action if a firm needing more time does so within 7 weeks of the relevant scheme deadline.
Brokers must give lenders requested documents, or confirm they hold none, within 1 month of a request.
The FCA said it is supervising lenders against a “central planning assumption” that, if the scheme or parts of it were quashed (declared invalid), there would be no complaints pause and no compensation scheme.
It told lenders to make the necessary provisions, engage with their auditors and keep appropriate capital and liquidity for that scenario in a UK regulated entity, including UK arms of international groups.
The regulator said it would take action, including business restrictions, if firms lack the right financial resources. It is also working with the Financial Ombudsman Service, which is planning for a significant rise in cases in that scenario.
Complaints to be answered within 8 weeks if scheme falls
If the scheme is overturned, the FCA said it may tell lenders to resolve complaints individually through the usual process. Lenders would need to respond within 8 weeks, and complainants could go to the Ombudsman.
The FCA said a revised scheme could face further challenge, and compensation could then be delayed until 2028 or beyond.
Not receiving a letter does not necessarily mean compensation is owed, the regulator said, because some consumers may not be told until the legal process ends.
It also revised its warning on claims firms. Consumers do not need a law firm or claims management company, which may charge up to 36% of any compensation, against over 30% in its earlier statements.
The FCA said the scheme is “the quickest, fairest and most efficient way to compensate consumers” and that it will defend it. It expects a judgment in the months after the hearing.
