Key facts
- The Upper Tribunal will hear motor finance legal challenges from February 16-26, 2027.
- The FCA's motor finance compensation scheme has been partially suspended.
- Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance challenged the scheme.
- Consumer Voice, represented by Courmacs Legal, also challenged the scheme.
- Firms must continue preparing for the scheme and handling complaints.
- Lenders must plan for the possibility of no compensation scheme and no complaint handling pause.
The Upper Tribunal has confirmed that it will hear legal challenges to the Financial Conduct Authority's (FCA) motor finance compensation scheme between February 16 and 26, 2027. The scheme has been partially suspended following challenges brought by three lenders: Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance, as well as by Consumer Voice, represented by Courmacs Legal.
Despite the partial suspension, firms are required to continue preparing for the scheme and to progress complaints as far as possible. The FCA stated that its scheme is the quickest, fairest, and most efficient way to compensate consumers and that it will defend it robustly. Lenders are advised to plan for the possibility that the scheme, or parts of it, may be quashed, which would mean lenders would need to resolve complaints through the usual complaint-handling process within statutory timescales. Firms are encouraged to make necessary financial provisions and engage with their auditors.
For consumers, the legal challenge means that lenders do not need to calculate or pay compensation under the scheme until the legal process concludes. While some consumers may be informed if they are not owed compensation, others may not receive notification until the legal proceedings are finished. The FCA advises consumers to complain directly to their lender for free if they have concerns about their car finance agreement and to be cautious of claims management companies that may charge significant fees.