Car Finance Redress: Where the Scheme Stands Now

As of October 2026 the FCA’s motor finance redress scheme exists, has final rules, and is partly suspended. The Upper Tribunal partially suspended it on 2 July 2026 following legal challenges, and will hear those challenges from 16 to 26 February 2027. Until the legal process concludes, lenders do not have to calculate or pay compensation, and the FCA expects payments to begin in 2027 if the scheme is upheld and not appealed. Everything below is dated, because almost all of it can move.

What the scheme is, in numbers

The FCA confirmed the final scheme in Policy Statement PS26/3, published on 30 March 2026. The FCA’s statement confirming the motor finance redress scheme, last updated 14 September 2026, gives the scale:

• Expected redress of about £7.5 billion, with a total bill to firms of about £9.1 billion once roughly £1.6 billion of non-redress costs is included.
• About 12.1 million eligible agreements.
• Average redress of about £829 per agreement.
• Coverage of motor finance agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid commission to the broker.

The FCA’s car finance claims page for consumers, last updated 13 October 2026, puts the eligibility rate at about 37% of agreements made in that period. That corrects a common assumption: most agreements from the period do not attract a payout.

What the legal challenge actually suspends

On 2 July 2026 the FCA published a statement confirming the motor finance scheme was partially suspended. The suspension was agreed with the four commercial parties challenging the scheme: Consumer Voice, represented by Courmacs Legal, together with Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance.

What is suspended: firms do not have to calculate or pay scheme redress, or send communications about compensation owed under the scheme timetable.

What is not suspended: firms must still identify relevant complaints and agreements; gather data on commission arrangements and disclosure practices, including data held by brokers; respond by the scheme deadlines to complainants who are not owed compensation; tell complainants the outcome of any non-scheme part of a mixed complaint; and cooperate fully with the Financial Ombudsman Service on referred complaints. Brokers must provide requested documents to lenders, or confirm they hold none, within one month.

That explains an otherwise baffling experience: as of October 2026 some people are receiving letters saying they are owed nothing, while nobody is paid. The FCA’s consumer page is blunt that not receiving a letter does not necessarily mean you are owed compensation, because some consumers may not be told until the legal process concludes.

The FCA’s 13 October 2026 statement that the legal challenge will be heard in February 2027 sets the hearing for 16 to 26 February 2027, with judgment expected in the months that follow. The FCA’s position is unambiguous: “Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.”

The dates that still bind

Even suspended, the scheme carries live deadlines. As of October 2026:

• Agreement starting on or after 1 April 2014, complained about by 30 June 2026 — your lender should contact you by 18 November 2026.
• Agreement starting before 1 April 2014, complained about by 31 August 2026 — your lender should contact you by 18 January 2027.
• Complaints made after those dates — the lender should respond within five months of receiving them.
• If you have not been contacted by your firm, you can still complain to it by 31 August 2027.

Two practical notes. The FCA has said it will not treat a firm as non-compliant, or take enforcement action, if it tells consumers within seven weeks of the relevant scheme deadline — so a letter arriving in early January 2027 for a November 2026 deadline is not necessarily a breach. And the complaint-handling pause that applied to motor finance complaints expired on 31 May 2026, so complaints that fall wholly outside the scheme should now proceed as usual.

Once a response does arrive, the consumer timetable is short: you have one month to accept or challenge your lender’s response, and once you accept, the lender has one month to pay.

Whether your agreement is likely to be in scope

Three filters do most of the work. First, the date: the agreement must have started between 6 April 2007 and 1 November 2024. Second, commission: the scheme covers agreements where the lender paid commission to the broker — for most buyers, the dealership or broker who arranged the deal rather than a direct-to-lender loan. Third, the 37% figure: eligibility within the covered period is the exception rather than the rule, so a confident claim that your agreement qualifies, made by anyone who has not seen your paperwork, is not based on evidence.

If you are trying to establish what you had, the finance agreement itself is the primary document. Lenders are required to gather commission and disclosure data, including from brokers, so the lender is the right first port of call.

The cost of using a claims firm

This is where buyers are most likely to lose money unnecessarily. The FCA’s October 2026 consumer statement makes four points worth repeating:

• You can complain directly to your lender for free, without using a law firm or a claims management company.
• Law firms and CMCs may charge up to 36% of any compensation.
• Do not sign up with more than one, as you may be charged multiple fees.
• Any fee to cancel an agreement with a CMC or law firm should be reasonable and reflect the work actually done.

The FCA states that it has seen poor practice from some CMCs and law firms, and provides a template complaint letter for people with concerns about how their claim was handled. On a £829 average payout, a 36% fee is roughly £300 for work that the FCA says you do not need to pay for.

What happens if the scheme falls

Planning for that outcome is not pessimism; the FCA has told firms to do it. Its information for firms on motor finance complaints and its October 2026 statement tell lenders to plan for a scenario in which the scheme, or parts of it, is quashed — in which case there would be no scheme and no complaint-handling pause, and firms would have to resolve complaints through the usual process within normal statutory timescales. The FCA has told firms to make the necessary financial provisions, engage with their auditors, and hold appropriate capital and liquidity in a UK regulated entity, and has said it may impose business restrictions where resources are inadequate.

For an individual, the consequence is relatively simple. If the scheme is upheld and not appealed, payments are expected to start in 2027, and you can ask the Financial Ombudsman Service to review your lender’s decision if you think the scheme rules were not followed. If it is overturned in whole or part, the FCA will decide next steps and may require lenders to handle complaints individually, with responses due within eight weeks, after which the Ombudsman route reopens.

In either case, the sensible position is to have complained to the lender, kept the agreement paperwork, and paid nobody a percentage for doing it.

Frequently asked questions

Is anyone being paid compensation as of October 2026? No. The FCA’s consumer page, updated 13 October 2026, states that until the legal process ends lenders do not need to calculate or pay compensation, and that payments are expected to begin in 2027 if the scheme is upheld and not appealed.

What is the deadline to complain about my car finance agreement? If your firm has not contacted you, the FCA says you can still complain to it by 31 August 2027.

Does a letter saying I am owed nothing mean the scheme has finished with me? Not necessarily. If you think the decision is wrong, ask the lender to review it; if you remain unhappy you can refer the complaint to the Financial Ombudsman Service, or consider a court claim.

Do I need a claims company to make a complaint? No. The FCA says you can complain directly to your lender for free, and that law firms and CMCs may charge up to 36% of any compensation.