The Upper Tribunal is due to hear challenges to the Financial Conduct Authority’s motor-finance compensation scheme over ten days from 16 to 26 February 2027. A judgment is expected in the months that follow. The timetable establishes when the legal dispute will be considered, but it does not decide whether the scheme is lawful or how much any borrower may be owed.
Who is challenging the scheme?
Three lenders are challenging the scheme: Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. Consumer Voice is also a challenger and is represented by Courmacs Legal. The FCA says it will defend the scheme. The dispute therefore concerns the framework for handling motor-finance redress, rather than a ruling on an individual customer’s complaint.
The hearing dates are scheduled for February 2027, with judgment expected afterwards rather than during the hearing itself. Until the tribunal has considered the challenges and the legal process has concluded, the scheme’s future remains unresolved. The FCA has warned lenders to prepare for the possibility that the scheme, or parts of it, could be quashed. That is a contingency, not a prediction that the tribunal will do so.
What the partial suspension means
The scheme is currently partially suspended, but that does not mean firms can stop dealing with complaints. Lenders must continue preparing for the scheme and progress complaints as far as possible. They must also comply with scheme rules that remain in force, including sending letters to some customers who are not owed compensation under the scheme.
The FCA says lenders should make financial provision and engage with their auditors while planning for more than one possible outcome. If the scheme or a part of it were quashed, there might be no scheme and no pause on complaint handling. Lenders would then need to be ready to deal with complaints through the usual process and within the usual statutory timescales. That preparation is intended to address uncertainty; it does not mean the FCA has decided the scheme will fail.
What borrowers can and cannot infer
Consumers will not receive compensation calculated or paid under the scheme until the legal process finishes. A lender may tell a complainant that the person is not owed scheme compensation, but some decisions may not be communicated until the challenge concludes. Equally, receiving no letter is not confirmation that compensation is due. The tribunal timetable provides no individual assessment of a car-finance agreement.
Borrowers concerned about an agreement who have not complained can complain directly to their lender without charge. The FCA says using a solicitor or claims-management company is not necessary to make a complaint. Such firms may charge up to 36 per cent of compensation, and a customer who signs with more than one firm may face multiple fees. Anyone asked to pay a cancellation fee should check that it is reasonable and reflects work already done; the regulator notes that most motor-finance claims remain at an early stage.
The next firm milestone is the February hearing, followed by a judgment expected in the subsequent months. Until then, the practical position is mixed: the scheme is not operating in full, some rules and complaint work continue, and no scheme compensation will be calculated or paid. The hearing may clarify whether the framework stands, changes or is set aside, but borrowers’ outcomes depend on the eventual legal result and the facts of their own cases.
