Update, 3 August 2026: a lender covered by the redress scheme has now failed, and the compensation position is not what most people assume. Blue Motor Finance entered administration on 30 July 2026, and the FCA used that announcement to state the position plainly: “Generally, there is no FSCS cover for consumer credit lenders. Any money owed to customers under our motor finance compensation scheme will not be covered by the FSCS.” So there is no protection limit to look up here, because consumer credit is not a covered product class at all, rather than one covered up to a cap. Anyone quoting you a savings protection figure has misunderstood which scheme applies. Two other consumer credit firms, Logbook Lending and Eldens Finance, entered administration on 1 and 6 July, so this is a pattern rather than a one off. Nothing about the redress timetable has changed: the Upper Tribunal dates and the scheme’s scope are exactly as set out below. What happens to your loan, and to money you were owed, when a lender fails is set out in full in our guide to what happens when your lender goes bust. Source: FCA, 30 July 2026.
Earlier updates: 28 July back to 19 May 2026
Update, 28 July 2026: the regulator is now spending money to keep people away from claims firms. On 27 July the FCA launched a nationwide campaign, running to 6 September 2026, under the line “You don’t need to pay to claim”. It is a 2 million pounds advertising push pointing drivers to a free template complaint letter on the FCA’s own car finance claims page rather than to a claims management company. The reason it is being spent: 27% of car finance customers say they lack the confidence to complain without using a CMC or a law firm, even though the free route exists. Sheree Howard, the FCA’s executive director, said: “Many people who may be owed compensation aren’t sure where to start or don’t realise they don’t have to pay someone to make a complaint.” The scale is unusual for a regulator, with video-on-demand ads expected to be seen almost 11 million times, 2,180 outdoor placements, national radio and print titles reaching a combined circulation of nearly 3 million. Nothing about the redress timetable has changed, and the scheme remains partially suspended. Source: FCA, 27 July 2026.
Update, 10 July 2026: the Upper Tribunal has confirmed hearing dates for the legal challenges to the FCA’s motor finance redress scheme, either 14 to 18 December 2026 or 16 to 26 February 2027, with a judgment expected some months after. Parts of the scheme were suspended on agreed terms on 2 July while firms continue background work. If the scheme is upheld with no further appeal, compensation (put at around 7.5 billion pounds system-wide, covering agreements from 6 April 2007 to 1 November 2024) would begin in 2027 rather than this year. The consumer steer is unchanged: you can still complain now even though any payout is delayed.
Update, 3 July 2026: The legal timetable is now fixed. The Upper Tribunal has partially suspended the FCA’s motor finance redress scheme (PS26/3) on terms agreed with the four challengers, Consumer Voice, Volkswagen Financial Services, Mercedes-Benz Financial Services and Credit Agricole Auto Finance, and will hear the substantive challenges from 14 to 18 December 2026, or from 16 to 26 February 2027 if the parties seek expert evidence or further disclosure. That supersedes the earlier “unlikely before October 2026” framing below. While the challenges are heard, firms do not have to calculate or pay redress, though they must still identify and tell the consumers who are not owed anything, so the compensation stage is paused rather than cancelled. The practical point is unchanged: you can complain to your lender free of charge now, and you do not need a claims management company. Source: Motor Trader, 2 July 2026; see also the FCA’s PS26/3 page.
Update, 29 June 2026: The scheme’s 30 June 2026 start is now conditional. On 24 June the FCA said the redress timetable can be paused after the consumer group Consumer Voice applied to the Upper Tribunal (under section 404D of FSMA 2000), challenging the compensation method as under-compensating drivers. The FCA has told firms to keep preparing until told otherwise. A Tribunal resolution has been mooted for around mid-November 2026, and the timetable could slip into 2027. The scope is unchanged: about 12.1 million agreements and an expected industry payout near 7.5 billion pounds. For the FCA’s statement see Legal challenges to motor finance compensation scheme: update for firms and consumers (FCA, June 2026).
Update, 23 June 2026: The redress scheme now has firm commencement dates. Under Policy Statement PS26/3, it begins on 30 June 2026 for agreements taken out from 1 April 2014, and on 31 August 2026 for earlier agreements (back to 6 April 2007). Commencement is the point from which lenders must start reviewing eligible agreements; it is not the point at which money arrives. The four Upper Tribunal challenges (Mercedes-Benz Financial Services, Volkswagen Financial Services, CA Auto Finance and Consumer Voice) are unchanged, hearings are still not expected before October 2026, and payouts remain unlikely before the end of 2026 and may run into 2027. The practical point is the same: you do not need to wait for the scheme, or pay a claims management company, to complain to your lender for free now.
Update, 19 May 2026: Two material developments since this article first published. (1) Scheme start delayed to at least November 2026. The FCA’s 8 May 2026 statement told lenders to prepare on a precautionary basis for a court decision in mid-November, with hearings “unlikely before October 2026.” Mass payouts will therefore not begin in July as originally planned. If the redress scheme is quashed entirely by the four challengers (Mercedes-Benz Financial Services, Volkswagen Financial Services, Crédit Agricole Auto Finance, and Consumer Voice, the latter arguing the scheme under-compensates and excludes 4.7 million agreements), the FCA would have to re-consult, risking further delay. (2) Complaints pause lifts 31 May 2026, file now, regardless of scheme timing. The FCA’s pause on motor finance discretionary commission arrangement complaints, in place since January 2024, ends on 31 May 2026. Firms must begin issuing final responses. The judicial reviews do not affect your right to file a complaint. Filing now preserves your position. Free reclaim tools (such as MoneySavingExpert’s motor finance reclaim tool) remain the simplest route; you do not need a claims management firm and should be wary of CMC fees of up to 30% of any redress (see our companion article on CMCs).
The FCA’s motor finance redress scheme was supposed to start running this summer. The regulator confirmed on 8 May 2026, and further restated through 14 May 2026, that legal challenges from three major lenders and a consumer advocacy group would push the Upper Tribunal hearings back to October 2026 at the earliest. The Tribunal has since fixed those hearings for 14 to 18 December 2026, or 16 to 26 February 2027 if the parties seek expert evidence or further disclosure, so payouts under the scheme are now unlikely before 2027. Around 12.1 million car finance agreements are caught up in the dispute, with average redress estimated at £830 per agreement and a total scheme value of around £7.5 billion.
If you bought a car on finance between April 2007 and January 2024, this affects you. Here is what has actually changed, what your options are right now, and why you do not need to pay a claims management company 30% of your compensation to get it.
The short version
- The FCA’s motor finance redress scheme (PS26/3) was confirmed in March 2026 and was originally on track to begin operating in 2026.
- Four parties have filed Upper Tribunal challenges to quash the scheme as unlawful: CA Auto Finance (Crédit Agricole), Mercedes-Benz Financial Services, Volkswagen Financial Services, and consumer advocacy group Consumer Voice.
- The Upper Tribunal will hear the challenges on 14 to 18 December 2026, or 16 to 26 February 2027 if the parties seek expert evidence or further disclosure, so payouts under the scheme are unlikely before 2027. That supersedes the FCA’s May 2026 guidance, which had put hearings no earlier than October 2026.
- The FCA has formally told lenders to prepare a “no scheme” contingency by mid-November 2026, under which a complaint-led approach would apply instead. The FCA has stated it will defend the scheme robustly in the Tribunal.
- Consumers can still complain directly to lenders, free of charge, today. The Financial Ombudsman Service (FOS) escalation route remains available.
- Your lender should tell you where you stand by 18 November 2026 (agreements from 1 April 2014, complained by 30 June 2026) or 18 January 2027 (earlier agreements, complained by 31 August 2026). Both of those complaint dates have passed, so anyone complaining now falls under the fallback: 5 months from the day the complaint arrives. That is why 31 August was a scheduling date and not a cut off.
- Claims management companies are not necessary. They typically take 30% or more of any compensation. The lender process and FOS are free. The FCA opened a separate sector review of CMC practices in motor finance on 7 May 2026 (covered in our companion piece on CMC concerns).
How we got here
The motor finance story has been running since the Financial Conduct Authority paused complaint handling on discretionary commission arrangements (DCAs) in January 2024. DCAs were a common feature of car finance from April 2007 until they were banned in January 2021. Under the typical arrangement, brokers (often the dealership) could set the interest rate on a customer’s loan within a range agreed with the lender, and earn higher commission for setting a higher rate. Customers were not always told the broker had this discretion or that it was linked to their personal interest rate.
An October 2024 Court of Appeal ruling in three test cases (Johnson v FirstRand Bank, Wrench v FirstRand Bank, and Hopcraft v Close Brothers) found that brokers owed a fiduciary duty to customers and that hidden commission arrangements were potentially unlawful. The Supreme Court partially overturned that broader fiduciary-duty finding in August 2025, but kept the door open for unfair-relationship claims under the Consumer Credit Act 1974.
In March 2026, the FCA published Policy Statement PS26/3, setting out the rules for a market-wide redress scheme. The scheme would:
- Cover motor finance agreements entered into between 6 April 2007 and 31 January 2024.
- Require lenders to assess potentially affected agreements proactively, rather than waiting for complaints.
- Compensate consumers where the lender’s broker received a discretionary commission and either it was not disclosed clearly enough or the resulting deal was unfair.
- Operate alongside the existing FOS route for individual complaints.
What the legal challenges are about
Three lenders and a consumer advocacy group have filed applications at the Upper Tribunal seeking to quash the redress scheme. They are:
- CA Auto Finance (Crédit Agricole). A major French banking group’s car finance arm.
- Mercedes-Benz Financial Services UK. The captive lender for Mercedes-Benz buyers in the UK.
- Volkswagen Financial Services (UK). The captive lender for VW Group brands (VW, Audi, SEAT, Skoda) in the UK.
- Consumer Voice. A consumer advocacy group, challenging from the opposite direction (broadly, that the scheme is insufficient).
The lender challenges typically argue that the FCA has exceeded its statutory powers in mandating a proactive redress scheme of this scope, that the scheme treats different lenders unfairly, and that the methodology for calculating redress is flawed. The Consumer Voice challenge is reported to argue, conversely, that the scheme’s eligibility rules exclude consumers who should be entitled to redress.
The Upper Tribunal will hear these challenges on 14 to 18 December 2026, or 16 to 26 February 2027 if the parties seek expert evidence or further disclosure. That supersedes the FCA’s May 2026 guidance, which had put hearings no earlier than October 2026. Realistic payouts under the scheme, assuming the FCA prevails, would then begin in 2027. If the challenges succeed, the FCA will need to redraft the scheme or fall back to a complaint-led approach where consumers complain individually and the FOS adjudicates disputed cases. The regulator has told lenders to be operationally ready for that no-scheme contingency by mid-November 2026.
What the FCA is telling lenders to plan for
In its 8 May update, the FCA told lenders to prepare for two scenarios simultaneously:
- Scheme proceeds. Lenders should be ready to operationalise the proactive redress scheme from November 2026 onwards, including identifying eligible agreements, calculating redress, and contacting customers.
- “No scheme” contingency. If the challenges succeed, the regulatory environment defaults to a complaint-led model under the existing Consumer Credit Act framework. Consumers would complain directly to lenders, with FOS escalation available. Lenders should plan operationally for that volume.
Either way, the FCA’s position is that consumers should not be left without recourse, and the complaint and FOS routes remain open.
What you can do right now
The most important point: you do not have to wait for the scheme to start before you can complain. The lender complaint process and FOS escalation are available now, free of charge, regardless of how the legal challenges turn out.
Step 1: Work out whether you were affected
You may have been affected if all of the following apply:
- You bought a car using a finance agreement (hire purchase, conditional sale, PCP, or personal contract hire) between 6 April 2007 and 31 January 2024.
- The finance was arranged through a broker (in practice, this is usually the dealership).
- The broker could set the interest rate within a range agreed with the lender (a “discretionary commission arrangement”).
- The commission arrangement was not clearly disclosed to you at the time, or the rate you ended up with was higher than it would have been on a non-discretionary basis.
The last two points are the ones you cannot usually know from the paperwork alone. That is exactly what the complaint process is for: you complain to the lender and ask them to investigate.
Step 2: Find your finance agreement details
You will need (or it helps to have):
- The name of the lender (often on the agreement; sometimes the lender is not the dealer’s brand).
- The agreement reference number.
- The start and end dates.
- The total amount financed and the interest rate.
If you no longer have the paperwork, the lender is required to provide a copy on request, usually free of charge for the first request. They can also be asked to provide a Subject Access Request response under data protection law if you want the full file.
Step 3: Complain directly to the lender
Write to the lender (email is fine; keep a copy) stating that:
- You took out a motor finance agreement on [date] with [lender] for [amount] at [rate].
- You wish to complain that the commission arrangement with the broker was not disclosed clearly, and you believe it may have led to you paying a higher interest rate than was necessary.
- You ask the lender to investigate and respond in line with their complaints policy and FCA rules.
The lender has eight weeks to respond. If they reject your complaint or do not respond, you can escalate to the Financial Ombudsman Service. FOS is free for consumers and can adjudicate disputes up to certain financial limits.
Step 4: Track which lender you actually dealt with
The dealer brand and the lender brand are often different. Common examples:
- Volkswagen, Audi, SEAT, and Skoda finance is typically Volkswagen Financial Services UK.
- Mercedes-Benz dealer finance is typically Mercedes-Benz Financial Services UK.
- BMW and MINI dealer finance is typically BMW Financial Services.
- Ford finance is typically FCE Bank (Ford Credit).
- Many dealers used Black Horse (part of Lloyds Banking Group), Santander Consumer (UK), Close Brothers Motor Finance, MotoNovo Finance, or Northridge Finance.
Your finance agreement will show the actual lender. Send your complaint to that organisation, not to the dealer.
Step 5: When your lender has to get back to you
Complaining does not put you in an open ended queue. The FCA has set dates by which your lender should tell you where you stand, and which one applies depends on when your agreement started and when you complained.
- 18 November 2026, if your agreement began on or after 1 April 2014 and you complained by 30 June 2026.
- 18 January 2027, if your agreement began before 1 April 2014 and you complained by 31 August 2026.
- 5 months from the day your complaint arrives, if you complain after those dates. Both have now passed, so this is the position for anyone complaining today.
That last line is the one worth reading twice, because it is what makes 31 August a scheduling date rather than a cut off. Complaining after it does not remove you from the scheme and does not cost you compensation. It changes only how quickly your lender has to come back to you. The FCA’s wording is that “your lender should tell you within 5 months of receiving your complaint”.
Two situations where those dates do not apply. The FCA says the deadlines do not apply if your lender considers your complaint is out of time. They also do not apply where your complaint is about a contractual tie and the lender says you are not owed compensation because there were visible links between the lender, the manufacturer and the franchised dealer. In either case the dates above stop being a commitment about when you will hear back, so a lender that has gone quiet on one of those grounds is not necessarily in breach of anything. Source: FCA, motor finance scheme partially suspended.
Why claims management companies are not necessary
Claims management companies (CMCs) and law firms have been advertising heavily on motor finance compensation. They typically charge 25% to 36% of any compensation as their fee. For an £830 average redress, that is around £210 to £300 you lose to the CMC for doing something the FCA system is set up to handle free of charge.
The lender complaints process is designed to be accessible to ordinary consumers. The Financial Ombudsman Service was set up specifically so that people do not need a paid representative to escalate a financial complaint. Both routes are free.
If you are nervous about drafting the complaint, you no longer need to go hunting for a template. The FCA publishes one itself on its car finance claims page, alongside a searchable list of lenders with their contact details and, where the lender has one, a link straight to its own complaint form. The regulator’s own wording is blunt: “You don’t need to use a CMC or a law firm to take part in our scheme.” Citizens Advice and MoneyHelper also provide free guidance. None of that requires a 30% commission.
What this means for the wider timeline
The redress scheme being delayed (Upper Tribunal hearings fixed for 14 to 18 December 2026 or 16 to 26 February 2027, payouts unlikely before 2027) has a few practical implications:
- Time is not running out on individual claims. The general limitation period under the Limitation Act 1980 for unfair-relationship claims is six years from the date the cause of action accrued. Your finance agreement and any unfair-relationship complaint do not expire because of the FCA’s delay.
- Don’t sign up to anything you don’t need. If a CMC contacts you saying you must act now before some deadline, that is a sales tactic, not a legal fact. The complaint and FOS routes do not depend on the FCA scheme.
- Lenders may be more receptive to direct complaints now. With the scheme uncertain, lenders have an incentive to resolve clear cases directly rather than wait for a court ruling.
- The FOS may have a backlog. If you escalate, allow time. FOS has been working through a high volume of motor finance referrals; cases can take months.
FAQ
Does the delay mean I will not be compensated?
No. The delay affects the timing of the FCA’s proactive redress scheme, not your right to complain. The complaint and FOS routes remain open. If the scheme survives the Upper Tribunal challenges, eligible agreements should be reviewed proactively. If the scheme is overturned, the FCA has signalled that a complaint-led approach would apply instead, with the same rules under the Consumer Credit Act 1974.
I have already paid off my car finance. Can I still complain?
Yes. The complaint can be made about the agreement regardless of whether it has been paid off, refinanced, or settled early. The general limitation period is six years from the date the cause of action accrued, but for unfair-relationship claims the limitation analysis is sometimes more flexible. The lender’s complaint team will assess your specific agreement.
I think my lender has gone out of business. What do I do?
Your complaint does not disappear, but the Financial Services Compensation Scheme is not the answer. The FCA’s position is that “Generally, there is no FSCS cover for consumer credit lenders”, and that any money owed under its motor finance compensation scheme “will not be covered by the FSCS”. There is therefore no protection limit to look up here, because consumer credit is not a covered product class at all rather than one covered up to a cap. What may still be possible is a claim against the administrators as an unsecured creditor, or a complaint against a successor entity where the loan book has been sold on. The route depends on what happened to the company, so start with the FCA’s own notice for that lender and ask FOS or Citizens Advice for guidance specific to it.
Should I wait until the scheme starts before complaining?
It is not necessary. You can complain now, and the lender’s response will draw on whatever rules and guidance apply at the time. If the scheme starts later and your agreement is in scope, the lender’s proactive review under the scheme would happen separately. The two routes are not mutually exclusive.
What is the average compensation likely to be?
The FCA’s working figure for the scheme is around £830 per affected agreement on average, against a total scheme value of around £7.5 billion. Individual amounts will vary based on the specific agreement, the interest rate paid versus a non-discretionary alternative, and how long the agreement ran. Some claims will be substantially larger, some smaller, and many agreements will not be eligible at all.
Will the compensation be taxable?
Generally, compensation that restores you to the position you would have been in (interest you should not have paid, refunded with statutory interest) is not taxable as income. The statutory interest element on top of the principal refund can in some cases be taxable. HMRC’s general guidance on personal compensation payments applies; if you have a large redress payment, ask HMRC or a tax adviser specific to your situation.
Where to go from here
- FCA legal challenges update (June 2026): Legal challenges to motor finance compensation scheme: update for firms and consumers
- FCA’s official update: fca.org.uk – motor finance redress scheme
- Financial Ombudsman Service: financial-ombudsman.org.uk
- MoneyHelper (government-backed money guidance): moneyhelper.org.uk
- Citizens Advice on complaints: citizensadvice.org.uk
This article explains the FCA motor finance redress scheme and the consumer complaint routes that remain open during the delay. The scheme timeline was last checked on 1 September 2026. It is general information, not personal advice. Your individual circumstances will determine whether a complaint is appropriate and likely to succeed. The timeline is still fluid: the Upper Tribunal will hear the challenges on 14 to 18 December 2026, or 16 to 26 February 2027 if the parties seek expert evidence or further disclosure, and parts of the scheme remain suspended until it rules. The FCA’s May 2026 guidance had told lenders to be operationally ready for a “no scheme” outcome by mid-November 2026.