U.K. Watchdog FCA Partly Suspends Car Finance Compensation Scheme Pending Legal Challenge

Financial Conduct Authority (FCA) has partially suspended its proposed motor finance compensation scheme while legal challenges against the plan are heard. The regulator said court proceedings are expected in December 2026 or February 2027.

The proposed redress scheme relates to allegations that lenders and dealerships did not adequately disclose commission arrangements on motor finance loans issued between 2007 and 2024. The plan has been challenged by Crédit Agricole, consumer group Consumer Voice, and the financial services units of Volkswagen and Mercedes-Benz. Under the partial suspension ordered by the Upper Tribunal, lenders will not be required to calculate or pay compensation or contact eligible consumers until the legal proceedings conclude. Firms must, however, continue responding to complaints that fall outside the proposed scheme.

The FCA said compensation payments could begin in 2027 if the scheme is upheld. If the plan is overturned and revised, payments could be delayed until 2028 or later.