Car finance compensation scheme partially suspended

(Sharecast News) - The City watchdog has been forced to partially suspend its multi-billion pound redress scheme for motorists who were mis-sold car finance, it was announced on Thursday.

London's Upper Tribunal ordered the suspension after legal action was brought by four parties, the consumer group Consumer Voice and three lenders: Volkswagen Financial Services, Mercedes Benz Financial Services and Credit Argicole Auto Finance. The Tribunal will hear the challenges either in December 2026 or February 2027, the Financial Conduct Authority confirmed.

"The partial suspension enables firms to keep preparing for the scheme and progress complaints as far as possible while avoiding work that may need to be repeated if the challenges succeeds," it said. "It also provides certainty for some consumers sooner, by requiring firms to tell complainants who are not owed compensation, subject to limited expectations."

The FCA first announced the scheme in March, following a lengthy investigation and various court hearings. The regulator ruled that motorists who had been treated unfairly under motor finance arrangements between 2007 and 2024 were due compensation, estimated to be around �7.5bn in total. Costs are expected to add another �1.6bn to the final bill.

"Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly," the FCA said.

Payments are currently slated to begin in 2027, assuming the tribunal upholds the scheme and the judgement is not then appealed. However, if it does need to be revised, payments would likely be pushed to 2028 or beyond, which could force the FCA to abandon the scheme.

"We want to secure fair compensation for consumer as quickly as possible," it said. "So, if the scheme is overturned, we may instead tell lenders to resolve complaints individually under the usual complaints process."