Motor finance redress moves towards its next legal milestone

What is the latest FCA update on motor finance redress?

The FCA confirmed on the 13th October 2026 that the Upper Tribunal will hear the legal challenges to its proposed motor finance compensation scheme between 16th and 26th February 2027. 

The challenges come from Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance, as well as a separate challenge from Consumer Voice, represented by Courmacs Legal. While these are ongoing, the scheme remains partially suspended. Lenders do not currently need to calculate or pay compensation, but they still need to continue identifying relevant complaints and agreements, gathering information about commission and disclosure practices, responding to certain complainants who are not owed compensation, and meeting the other rules that remain in place. 

What does the February 2027 hearing mean for motor finance firms?

The hearing date gives firms a more clarity on when the next stage will begin. However, it does not remove the uncertainty about how motor finance complaints and compensation will ultimately be handled. 

The FCA has specifically told lenders to prepare for the possibility that the scheme, or parts of it, could be quashed. If that happens, there may be no motor finance compensation scheme and no pause in complaint handling. Instead, lenders could need to manage complaints through the usual process and within normal statutory timescales. Firms therefore should not wait for the outcome of the legal challenge before getting ready. 

Motor finance firms affected

This update is particularly relevant to motor finance lenders within the scope of the compensation scheme. Although some requirements are suspended,  firms remain subject to a number of ongoing obligations while the legal challenge continues. 

Consumers with relevant motor finance complaints are affected too, as compensation calculations and payments remain on hold during the partial suspension. 

The main risks for motor finance firms

The practical challenge for firms is preparing – without knowing which complaints and redress process they will ultimately need to follow. Good quality, accessible data will remain essential. Firms also need to consider whether their complaint-handling arrangements could cope if the scheme does not go ahead as planned and complaints return to the usual process. 

The FCA has told lenders to plan carefully for the possibility that the scheme could be quashed, make appropriate financial provisions and keep their auditors involved. 

What should firms be doing ahead of the February 2027 hearing?

Firms should keep moving forward with the work required under the rules that remain in force, rather than seeing February as the point when preparations begin again. 

That means checking that relevant complaint and agreement data is complete and understanding where extra operational capacity may be needed. Firms that understand now how their complaints operation would respond in each scenario will be prepared to act once the picture becomes clearer. 

What could happen to the motor finance redress scheme after the legal challenge

The February hearing may not give firms an immediate answer and the FCA expects judgment in the months that follow. Until then, firms will need to keep preparing for the current scheme while recognising that the final approach could look different. 

 For compliance and operations teams, the priorities are to:

• keep relevant information accessible 

• understand potential complaint volumes and resource needs 

• maintain effective oversight as the legal position develops