CAR FINANCE LEGAL CHALLENGE DELAYS COMPENSATION PAYMENTS

A legal challenge to the Financial Conduct Authority’s proposed car finance compensation scheme is scheduled for 16 to 26 February 2027, according to Martin Lewis’ Money Saving Expert. Lenders have been given more time to present their case at an Upper Tribunal hearing. Finance firms must continue handling complaints under the scheme, but they do not currently have to calculate or pay compensation while the challenges remain unresolved. Lewis said “payouts are on hold.”

The FCA published its plans in March 2026 after a Supreme Court decision that broadly favoured consumers. The proposed scheme could provide around £7.5 billion to millions of motorists, according to the account of the plans. The FCA says it would cover certain discretionary commission arrangements and undisclosed commissions above specified thresholds. It would also cover agreements where a broker had given a lender exclusive first rights to provide credit without making that clear. Eligible agreements must have been signed between 6 April 2007 and 1 November 2024. The FCA’s proposal excludes some discretionary commission agreements where the broker received less than £120 before April 2014 or £150 thereafter.

The legal challenge could change who qualifies for compensation and how much they receive. A judgment is expected in the months after the hearing, possibly by mid-April. Lewis urged motorists to complain, saying they may “have no idea” whether their car finance was mis-sold unless they do so. He said firms must respond to complainants and also identify eligible customers who have not complained.