UK car finance compensation not due until legal process ends
The Financial Conduct Authority expects payments under the scheme to begin in 2027 if it is upheld and the judgment is not appealed.
Lenders do not need to pay car finance compensation until legal challenges to the scheme end, with the Upper Tribunal hearing them from 16 to 26 February 2027, the UK’s Financial Conduct Authority has said.
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 Upper Tribunal suspended parts of the scheme on 2 July 2026 on terms the regulator agreed with the four challengers, according to the regulator’s guidance for lenders.
Lenders must keep preparing for the scheme and progress complaints as far as possible. The regulator said: “Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.”
Rules that have not been suspended still apply, including sending letters to some customers who are not owed compensation. Lenders should also plan for the scheme or parts of it being quashed, in which case there may be no scheme and no complaint handling pause, and complaints would go through the usual process and statutory timescales.
What it means for customers
A judgment is expected in the months after the hearing. Until the legal process concludes, lenders do not need to calculate or pay compensation under the scheme. The regulator expects payments to start in 2027 if the scheme is upheld and the judgment is not appealed.
Customers who are not owed compensation under the parts of the scheme still in force should hear from their lender by 18 November 2026 if the agreement began on or after 1 April 2014 and they complained by 30 June 2026. For earlier agreements, where the complaint was made by 31 August 2026, the date is 18 January 2027.
Some customers may not be told until the legal process concludes, so not receiving a letter does not necessarily mean compensation is owed.
The scheme may apply to people who used car finance between 6 April 2007 and 1 November 2024 and were not told about certain arrangements between the lender and the broker, the regulator’s consumer guidance says.
The regulator estimates that 37% of agreements from that period, around 12.1 million, are eligible. People who receive compensation will get around £830 per agreement on average, though it says this will vary, with some getting more and some less.
The regulator says customers who have not yet complained can do so directly to their lender for free. They do not need a law firm or claims management company, which may charge up to 36% of any compensation, and it advises against signing up with more than one because multiple fees may be charged.
