Drivers awaiting compensation over their car finance agreements now have a clearer timetable for the legal proceedings affecting the FCA’s scheme. The Upper Tribunal will hear challenges to the programme between 16 February and 3 March 2027. A judgment is expected in the following months, according to an update published by the Financial Conduct Authority on 13 October.
Three lenders — Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance — have challenged the FCA’s scheme. Consumer Voice, represented by Courmacs Legal, has brought a separate challenge.
The FCA says the programme remains partially suspended while the legal process continues. Lenders must keep preparing for its possible implementation and progress customer complaints where they can. This leaves firms managing two practical demands: carrying out the work required under rules that still apply, while readying themselves for a court decision that could affect the scheme’s future.
The regulator has also set out a possible alternative route. If the tribunal overturns the scheme, in whole or in part, lenders could face a return to the usual complaints process. That approach would operate under the standard statutory deadlines. The FCA has asked firms to prepare their systems and finances for that possibility, and to work with their auditors on the necessary provisions.
The outcome will shape how complaints move forward, although customers may experience different timelines depending on their circumstances.
What are the lenders arguing?
They reason that the FCA exceeded its statutory powers and that some rules require lenders to presume unfairness and customer loss in circumstances where, they say, individual evidence should be assessed. They also dispute the compensation formulas, arguing that the resulting payments may lack a close link to each borrower’s actual situation.
CA Auto Finance and Mercedes-Benz raise a specific issue concerning agreements made before 1 April 2014. They argue that the FCA’s statutory authority for creating a redress scheme does not extend to that period, because responsibility for regulating consumer credit passed from the Office of Fair Trading to the Financial Conduct Authority in April 2014. Their challenge asks the tribunal to decide whether the organisation can use its current powers to cover contracts pre-dating that transfer.
A dispute over time limits and the burden of proof
Mercedes-Benz also contests how the scheme treats limitation periods, which determine whether a claim has been brought within the time allowed.
Its submission says that, in England and Wales, a claim seeking a financial remedy is generally subject to a six-year period running from the end of the credit relationship. The FCA’s rules treat inadequate disclosure of commission as likely to involve deliberate concealment, which can extend that window, and require lenders to show that the time limit has expired.
Mercedes-Benz argues that inadequate disclosure and deliberate concealment are separate legal questions, and that the scheme shifts the evidential burden to lenders.
The balance between consumer redress and lenders’ rights
Consumer Voice, represented by Courmacs Legal, takes a different position. The group argues that the scheme would undercompensate consumers and estimates that lenders could retain at least £4.6 billion compared with a fuller repayment approach.
The organisation says the FCA gave too little weight to consumer protection and market integrity when setting compensation levels.
In its application, the consumer group has asked the tribunal to quash parts of the programme’s redress rules and require the Financial Conduct Authority to reconsider them. Its challenge centres on the amount and calculation of compensation.
What happens now
The tribunal’s decision will shape whether or not the current proposed scheme proceeds as planned and whether or not any changes will be mandated. In the meantime, drivers can review their own agreements and get an initial indication of whether they could fall within the scheme. Many lenders are confirming whether or not agreements were sold under a discretionary or fixed commission, with the former more likely to result in compensation.
Anyone who took out motor finance between 6 April 2007 and 1 November 2024 can use our eligibility checker to see whether their agreement(s) may qualify. The result provides an initial indication, while the lender’s assessment and the outcome of the legal challenge will determine what happens next.
Check your eligibility today and take a step towards a fairer motor finance industry.
