| Link(s): | Motor finance legal challenge to be heard in February 2027 | FCA Motor finance scheme: legal challenge documents | FCA |
Context
The FCA has announced that the Upper Tribunal will hear the legal challenges to the FCA’s motor finance compensation scheme between 16 and 26 February 2027. The FCA has also published documents relating to the motor finance compensation scheme legal challenge, including the directions of the Upper Tribunal.
Key points to note and next actions
- On 30 March 2026, the FCA established the Motor Finance Commission Consumer Redress Scheme (the Scheme).
- The lawfulness of the Scheme was challenged by three lenders – Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – and by Consumer Voice, represented by Courmacs Legal.
- The scheme is currently partially suspended. However, firms must keep preparing for the scheme and progress complaints as far as possible.
- The FCA reiterates that the scheme is the quickest, fairest and most efficient way to compensate consumers and that it will defend the scheme robustly.
- Lenders must comply with the scheme rules that remain in force. This includes sending letters to some consumers not owed compensation under the scheme.
- Firms should plan for the possibility that, if the scheme or parts of it are quashed, there may be no motor finance compensation scheme, and no complaint handling pause. In that scenario, lenders would need to be operationally and financially ready to resolve complaints through the usual complaint-handling process and within the usual statutory timescales.
- The FCA expects lenders to plan rigorously for this scenario, make the necessary financial provisions and engage with their auditors.
- The FCA encourages firms to contact it if they have questions. The FCA will keep its firm web page updated with the latest information.