Car finance scandal compensation payouts delayed to 2027 by legal challenge
Challenges from both a consumer rights group and lenders have resulted in a pause in payments until at least next year
Drivers will be forced to wait months for car finance scandal compensation, because an order by the Upper Tribunal has placed a partial suspension on the official Financial Conduct Authority redress scheme until at least the end of 2026.
Four challenges to the FCA’s proposal, which is estimated to result in an average of £829 per payout, have been made. Buyers’ rights organisation, Consumer Voice, claims the current scheme “protects the very firms that failed to follow the law”. On the other hand, Mercedes Benz Financial Services (MBFS), Volkswagen Financial Services (VWFS), and Crédit Agricole Auto Finance (CAAF) all assert that the current scheme is disproportionate and unlawful. VWFS and CAAF have even claimed that the FCA’s plans interfere with their property rights under the European Convention on Human Rights.
The Upper Tribunal says it will hear the respective arguments between either 14 and 18 December 2026, or 16 and 26 February 2027. Between now and a final ruling being made, the Tribunal has ordered that finance firms aren’t required to calculate or pay affected customers compensation.
Even if the scheme goes ahead as planned, payments won’t begin until at least the spring of 2027. If things are overturned, however, the watchdog says it “will need to decide what to do next”.
“A compensation scheme is the simplest route for consumers and the most efficient way for lenders to put things right,” the FCA claims. “However, if we were to seek views on a revised scheme that could face further legal challenge, and compensation could be delayed until 2028 or beyond”.
In the meantime, lenders will still be required to contact those who have claimed and aren’t due compensation; those with an agreement that began on or after 1 April 2014 and complained before 30 June 2026 must be contacted by 18 November 2026. In addition, those with an agreement prior to April 2014 and who complained before 31 August 2026 must be contacted by 18 January 2027. Those who complain after these dates and are not owed compensation must be contacted within five months.
Under the car finance scheme rules, lenders must contact anyone they believe might be affected and ask them whether they wish to opt into the scheme. However, by and large the recommendation is to submit a claim oneself as this ensures your case isn’t overlooked; the FCA advises to avoid using claims management firms, because these are unnecessary and “may charge you over 30 per cent of any compensation”.
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