Motor finance legal challenge to be heard in February 2027
AI Analysis
The FCA has confirmed that the Upper Tribunal will hear challenges to its motor finance consumer redress scheme from 16 to 26 February 2027. Although parts of the scheme remain suspended and lenders do not currently need to calculate or pay scheme compensation, firms must continue complying with the rules that remain in force and maintain operational and financial readiness for either outcome, including a return to ordinary complaint handling if the scheme is quashed.
Key dates
- 2026-03-30
- The FCA published PS26/3, establishing the motor finance consumer redress scheme for relevant agreements entered into from 6 April 2007 to 1 November 2024.
- 2026-05-31
- The FCA's general pause on handling certain motor finance complaints ended; complaints outside the scheme scope generally reverted to the applicable ordinary complaint-handling framework from 1 June 2026.
- 2026-06-30
- The implementation period for Scheme 2, covering agreements entered into from 1 April 2014 to 1 November 2024, was scheduled to end.
- 2026-08-31
- The implementation period for Scheme 1, covering agreements entered into from 6 April 2007 to 31 March 2014, was scheduled to end.
- 2027-02-16
- The Upper Tribunal hearing of the legal challenges to the motor finance compensation scheme is scheduled to begin.
- 2027-02-26
- The scheduled window for the Upper Tribunal hearing of the legal challenges is due to conclude.
Suggested considerations
- Compliance teams may wish to maintain a documented inventory of complaints, agreements, commission data, consumer communications and redress calculations so that scheme preparation can resume promptly if the legal challenges fail.
- Lenders should continue complying with all motor finance scheme rules that have not been suspended, including required notifications to consumers who are not owed compensation.
- Firms should model both principal outcomes: implementation of the scheme after judgment and resumption of ordinary complaint handling if the scheme or relevant provisions are quashed.
- Operational planning may include capacity, case-management systems, data remediation, quality assurance, customer communications and escalation procedures for the ordinary DISP complaint process.
- Finance, risk and compliance teams should consider scenario-based provisions for scheme redress, litigation-related costs and ordinary complaint liabilities, and should engage auditors regarding assumptions, evidence and disclosure.
- Firms should review whether complaints outside the scheme scope are being handled under the ordinary DISP time limits, rather than being treated as covered by the suspended scheme arrangements.
- Senior management may wish to monitor the tribunal proceedings, FCA firm updates and any subsequent judgment, appeal or amendments to CONRED and DISP requirements.
- Firms should consider customer-outcome and conduct risks arising from delayed compensation, incomplete communications, duplicated claims-management fees and inconsistent treatment of consumers during the suspension.
What changed
The Upper Tribunal hearing window is now confirmed for 16 to 26 February 2027. The scheme remains partially suspended, so lenders are not required to calculate or pay compensation under the scheme until the legal process concludes, but the suspension does not remove the requirement to comply with unaffected scheme rules, including sending specified communications to consumers who are not owed compensation. The FCA has expressly warned lenders to prepare for the possibility that the scheme, or parts of it, are quashed and that there is consequently no scheme-based complaint-handling pause. In that scenario, complaints would need to be resolved through the ordinary FCA complaint-handling framework and within the applicable statutory timescales. Independent legal and industry commentary indic
Compliance impact
The immediate impact is high for affected motor finance lenders because the suspension creates simultaneous requirements to preserve scheme readiness, comply with unaffected CONRED rules and prepare for potentially substantial ordinary complaint liabilities. Failure to maintain adequate provisions, complaint capacity, records or customer communications could create conduct, operational, audit and
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original FCA source before acting. Full disclaimer.
What the FCA said
The Upper Tribunal has confirmed it will hear the legal challenges to our motor finance compensation scheme between 16 to 26 February 2027. The scheme was challenged by 3 lenders - Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance - and by Consumer Voice, represented by…
Extract from FCA . Read the full notice at the source for the authoritative text.