Owing to the suspension, motor finance firms are not currently required to calculate or pay compensation, nor issue communications about compensation owed under the scheme timetable while the legal process unfolds. However, the regulator has reiterated this should not be viewed as a pause on all activity. Many aspects of the programme should continue and firms are still expected to prepare for the eventual resolution of the process. 

Four key takeaways for firms to consider now include: 

1. The compensation scheme remains the FCA’s preferred route 

One of the most notable aspects of the regulator’s statement is what has not changed for firms. Despite the legal challenge, the FCA continues to describe the compensation scheme as its preferred method for the quickest way to redress affected customers. The partial suspension is intended to avoid firms carrying out work that may need to be repeated if the legal challenge succeeds, while still allowing preparations to continue.  

For instance, firms that have already invested significant time in understanding complaint volumes, reviewing historic agreements or building redress programmes can take some assurance that this work remains relevant as the legal challenge continues. The FCA continues to emphasise that it will defend the scheme robustly, thereby reaffirming its view that a structured compensation approach remains the most effective route forward.  

2. Preparation continues to matter  

The FCA expects firms to continue identifying relevant complaints and agreements by gathering information on commission arrangements and disclosure practices. This includes working with brokers where relevant, and cooperating with the Financial Ombudsman Service (FOS) if complaints have been referred. Regardless of the eventual outcome, firms will likely still benefit from a thorough understanding of their historical lending arrangements, the data they have available and their customer populations. 

This regulatory approach of encouraging firms to resolve information gaps aligns with the FCA’s approach to ensure that progress continues even while elements of the scheme remain subject to legal review.  

3. Keeping customers informed remains important 

Some communication obligations remain in place. The FCA expects lenders to keep complainants updated on the latest developments, including explaining:  

• what the partial suspension means 

• when the legal challenge will be heard  

• the likely impact on complaint-handling and compensation timelines. 

Firms are also expected to notify complainants who are not owed compensation when the complaint falls outside the scheme’s scope or does not involve any unfair features.  

4. Flexibility is as key as preparedness  

Alongside preparations for the scheme, the regulator has asked lenders to plan for the possibility that the scheme, or parts of it, could ultimately be quashed by the Tribunal. In that scenario, firms may need to manage complaints through existing complaint-handling processes rather than through a dedicated compensation scheme. 

This is not necessarily a signal that the FCA expects the scheme to fail. Rather, it reflects prudent contingency planning while legal uncertainty remains. The message for firms is therefore less about predicting which outcome will emerge and more about ensuring they retain sufficient flexibility to respond effectively once the legal process concludes.