Upper Tribunal to hear motor finance redress scheme challenges between 16 and 26 February 2027

Important update: The FCA redress scheme is partially suspended

If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

In a statement published on 13 October 2026, the Financial Conduct Authority (FCA) confirmed that the Upper Tribunal will hear the four legal challenges to its motor finance consumer redress scheme between 16 and 26 February 2027, with a judgment expected in the following months. When the regulator announced the partial suspension of the scheme in July, it said that the Upper Tribunal would hear the challenges between 14 and 18 December 2026 or 16 and 26 February 2027.

Who is challenging the FCA redress scheme?

The scheme is being challenged by three lenders, Volkswagen Financial Services, Mercedes-Benz Financial Services and CA Auto Finance UK, and by the advocacy group Consumer Voice, which is represented by Courmacs Legal and believes that the scheme leaves ‘too many people short-changed’.

Why has the hearing been set for February?

The regulator said on 2 July 2026 that the dates for the Upper Tribunal to hear the challenges would depend on whether any of the involved parties applied for further expert opinion or disclosure of information, and whether any such application succeeded. AM Online has reported that, at the case management hearing held on 5 and 6 October 2026, the Upper Tribunal ordered the FCA to disclose further evidence and allowed every involved party to rely on expert evidence:

• Disclosure. The regulator must provide various datasets and its analyses of the impact of the discretionary commission arrangement (DCA) model and of the ban on DCAs, including the computer code or scripts underlying its matching methodology.
• Experts for the lenders. The Upper Tribunal ruled that Volkswagen Financial Services and CA Auto Finance UK may jointly instruct one economics expert to examine whether the commission arrangements covered by the scheme caused consumers harm, whether the FCA’s evidence supports its conclusions and whether the scheme could have been designed to target consumer losses more accurately. The Upper Tribunal separately granted Mercedes-Benz Financial Services permission to instruct an economics expert to examine how captive lenders, which are the in-house finance providers of vehicle manufacturers, differ from third-party lenders, and whether the regulator adequately recognised those differences in its redress methodology.
• Evidence for Consumer Voice. The advocacy group may rely on three reports from Dr Nils Gudat and one from Dr Pinar Bagci.
• FCA expert. The regulator has been granted permission to instruct one economics expert to respond on its behalf to the evidence presented by the four challengers.

The Irish News reported that Alex Neill, the co-founder of Consumer Voice, said that it had been ready for a hearing on the December dates, and that ‘the FCA and lender applicants blame each other for the delay’.

We have previously examined the arguments that mis-selling caused consumers no harm and that what has happened was a victimless technicality, neither of which we find persuasive, but which the Upper Tribunal will now hear with the benefit of expert evidence on both sides. Whatever the merits of those arguments, consumers will wait until at least the spring of 2027 for a decision on whether the scheme can go ahead as it was designed and presented in Policy Statement PS26/3.

What does this mean for motor finance redress?

The scheme remains partially suspended until the conclusion of the legal process, and lenders do not need to calculate or pay compensation under the scheme in the meantime, although the FCA has again told them that they must keep preparing for the scheme and progress complaints as far as possible. In its 2 July 2026 statement, the regulator said that, if the scheme is upheld and the Upper Tribunal’s judgment is not appealed, it expects payments under the scheme to begin in 2027. The FCA also stated that, if it had to seek views on a revised scheme, redress payments could be delayed until 2028 or beyond. With the challenges now listed to be heard in mid-to-late February, it seems unlikely to us that payments under the scheme, if it is upheld and the decision is not appealed, will begin before the second half of 2027.

In its statement on 13 October 2026, the regulator repeated its warning that, if the scheme or parts of it are quashed, ‘there may be no motor finance compensation scheme and no complaint handling pause’, and that lenders would then need to resolve complaints ‘through the usual complaint-handling process and within the usual statutory timescales’.

The FCA has said previously that, should this happen, it may tell lenders to resolve complaints individually, meaning they would have eight weeks to respond and consumers could take their complaint to the Financial Ombudsman Service should they be dissatisfied with the response or if they do not receive one. In that case, the specific evidence and facts behind each individual complaint are likely to matter a great deal more than they would under a scheme designed to pay redress at scale by applying the same rules to millions of agreements.

Does that mean I will not hear from my lender until at least February?

Your lender may write to you in the coming weeks and months, and it may have already done so.

While some parts of the redress scheme are suspended, lenders must tell you if you are not owed compensation under the scheme by:

• 18 November 2026, if your agreement began on or after 1 April 2014 and you complained by 30 June 2026;
• 18 January 2027, if your agreement began before 1 April 2014 and you complained by 31 August 2026; or
• within five months of receiving your complaint, if you complained after these dates.

The FCA has said that it will not treat a lender as non-compliant if it writes to you within seven weeks of the relevant deadline. Some exceptions to these deadlines also apply, concerning aspects of the scheme that are subject to the legal challenges, so you should not assume that receiving no letter from your lender means that you will be owed compensation.

We have previously published a guide explaining what to do if your lender writes to you to say you are not owed compensation.

Do I need to do anything now?

If you have already complained to your lender, your complaint remains live and you do not need to complain again. If you have not yet complained, you can do so directly to your lender at no cost and do not have to use a solicitor or a claims management company to get any compensation you may be owed.

The FCA’s claims page explains how you can do this yourself.

Register your motor finance claim with Harcus Parker

If you choose to instruct us to manage your motor finance claim, we can:

• identify any car finance agreements you have had since 6 April 2007;
• request disclosure of the commission paid on your agreement and of any ties between the lender and the dealer;
• review any letter telling you that you are not owed compensation and challenge this if we believe it to be wrong;
• verify, assess and, if necessary, challenge any redress offer you receive should the scheme proceed; and
• investigate whether you may have grounds for claims that fall outside the scheme.

Instructing a solicitor does not guarantee that you have a valid claim or that you will receive a higher compensation award, but it may bring other benefits, including those listed above.

You can check your eligibility and register your car finance claim with Harcus Parker here.