FCA Motor Finance Scheme Partially Suspended: What It Means for Consumers

Millions of consumers with motor finance complaints have faced another significant development following a recent development with The Upper Tribunal.

The Upper Tribunal has suspended parts of the The Financial Conduct Authority (FCA)'s proposed Motor Finance Compensation Scheme following legal challenges from four commercial parties.

The update follows an Upper Tribunal order published on 2 July 2026 and accompanying FCA guidance. Here is what has happened, what it means for your complaint, and what your options are.

What is the Upper Tribunal?

For those who are unfamiliar, the Upper Tribunal is a superior court of record in the UK. What does that mean?

Put simply, it is one of the UK’s senior courts. When it makes decisions like this, regulators, such as the FCA have to follow them unless a higher court says otherwise. Its primary role is to hear and decide appeals on points of law from decisions made by the First-tier Tribunal.

What Has the Upper Tribunal Done?

The Upper Tribunal has issued an order partially suspending the FCA's Motor Finance Compensation Scheme. This follows legal challenges from Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and Consumer Voice, represented by Courmacs Legal.

The partial suspension does not mean the scheme has been cancelled. The FCA has said it intends to defend the scheme and considers it the quickest, fairest and most efficient way to compensate consumers. However, the legal process must now run its course before compensation payments can begin under the proposed scheme.

When Will the Legal Hearing Take Place?

The Tribunal has provisionally listed the hearings for either 14 to 18 December 2026 or 16 to 26 February 2027. The final dates will depend on whether any party applies for further expert evidence or disclosure of information.

After the hearing concludes, a judgment is expected several months later. Based on the current Tribunal timetable, a decision is unlikely before mid-2027.

What Does the Partial Suspension Mean for Compensation Payments?

Until the legal challenge is resolved, lenders are not required to calculate compensation, send compensation offers or make payments to consumers under the scheme timetable.

This is a significant change from where things stood only weeks ago, when many consumers had expected further progress during 2027. Based on the current timetable, widespread compensation payments are now unlikely before mid to late 2027 at the earliest, assuming the scheme remains in place and there are no further appeals.

What Are Lenders Still Required to Do?

While compensation payments are on hold, lenders have not been given a free pass to pause all activity. The FCA has confirmed that firms must continue to:

• Identify relevant complaints and finance agreements.
• Gather data on commission arrangements and disclosure practices, including information held by brokers.
• Investigate complaints and prepare for the scheme.
• Cooperate fully with the Financial Ombudsman Service on existing complaints.
• Notify consumers whose agreements are assessed as falling outside the scope of the scheme by the relevant FCA deadlines, subject to limited exceptions.

That final point is important. The partial suspension is intended to avoid firms duplicating work if the scheme changes, while still giving some consumers greater certainty sooner.

Will Some Consumers Receive Decisions Sooner?

Yes. One outcome of the partial suspension is that lenders must still notify consumers whose agreements are assessed as falling outside the scope of the scheme. However, you'll only get your decision sooner if your claim doesn’t fall under the FCA scheme.

If your agreement began on or after 1 April 2014 and you complained by 30 June 2026, the FCA currently expects lenders to notify affected consumers by 18 November 2026.

If your agreement began before 1 April 2014 and you complain by 31 August 2026, the FCA currently expects lenders to notify affected consumers by 18 January 2027.

If you believe your lender has made a mistake, you can ask it to review its decision. If you remain unhappy with the outcome, you may be able to refer your complaint to the Financial Ombudsman Service.

What Happens if the Scheme Is Overturned?

The FCA has confirmed it is preparing for both possible outcomes.

If the scheme survives the legal challenge and the judgment is not appealed, the FCA expects compensation payments to begin during 2027, with lenders following the scheme rules under FCA supervision.

If the scheme is overturned in whole or in part, the FCA has indicated it may not pursue a revised scheme because further legal challenges could delay compensation until 2028 or beyond. Instead, the FCA has said it may require lenders to resolve complaints individually through the standard complaints process. In that situation, firms would normally need to respond within eight weeks and consumers could refer unresolved complaints to the Financial Ombudsman Service.

Should You Still Submit a Complaint?

Yes. The FCA has not told consumers to stop submitting complaints. Making a complaint now means it enters the lender's complaints process while firms continue preparing behind the scenes.

If you have not yet complained and you think your finance agreement may have involved undisclosed discretionary commission arrangements, you can submit a complaint directly to your lender free of charge. Whether compensation is available depends on the facts of your agreement and the outcome of the FCA's process.

The FCA's website includes lender contact details and guidance on how to make a complaint yourself.

Do You Need a Claims Management Company?

The FCA has been clear that you do not need to use a claims management company or law firm to make a motor finance complaint.

Using a third party could mean giving up more than 30% of any compensation you receive if your complaint is successful.

If you do choose to use a claims management company, make sure you understand the fees involved before signing any agreement. You should also avoid signing up with more than one firm, as this can result in disputes over representation and multiple fee deductions.

Mis-Sold Expert is authorised and regulated by the Financial Conduct Authority. If you would like information about how regulated claims management services work, including our fees, our team can explain the process before you decide whether to proceed.

What Happens Next?

The next key milestone is the Tribunal hearing, which is expected to take place in December 2026 or February 2027.

Until then, the FCA will continue supervising firms, defending the proposed scheme and preparing for both possible outcomes.

If you think your finance agreement may have involved undisclosed commission arrangements, you can still submit a complaint directly to your lender free of charge. Consumers should also be cautious of anyone suggesting compensation payments are imminent or claiming there is an urgent deadline to submit a complaint.

We will continue to publish updates as this situation develops. You can also monitor the FCA's motor finance pages for the latest regulatory guidance.

Disclaimer: This article is provided for general information only and does not constitute legal or financial advice. Eligibility for compensation depends on the individual circumstances of your finance agreement and the outcome of the FCA's motor finance process.