Legal challenges to the Financial Conduct Authority's (FCA) motor finance compensation scheme will be heard by the Upper Tribunal between February 16 and 26, 2027, the regulators has confirmed.
The scheme was challenged by three lenders, Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance, and by Consumer Voice, represented by Courmacs Legal. A judgment is expected in the months after the hearing.
The scheme has been partially suspended since July, when the Upper Tribunal ordered a pause on terms agreed between the FCA and the four challengers. At that point the tribunal had set two possible hearing windows, in December 2026 or February 2027. The later date means payments are now unlikely before 2027 at the earliest, with some lawyers suggesting they could slip into 2028.
The FCA said lenders must keep complying with the scheme rules that remain in force, including sending letters to some consumers who are not owed compensation.
It also warned firms to plan for the possibility that, if the scheme or parts of it are quashed, there may be no scheme and no pause on complaint handling. In that case, lenders would need to be ready, operationally and financially, to resolve complaints through the normal complaint-handling process and within statutory timescales.
Harry Charalambous, principal at consultancy Broadstone, said lenders could not afford to put their preparations on hold.
“Those that wait for complete legal certainty risk facing a compressed timeframe to resolve complex historic complaints, placing significant pressure on resources and increasing execution risk,” said Charalambous.
He said historic data gaps, legacy systems, identifying the right customers and building redress calculations would all take time to address.
The FCA confirmed its industry-wide scheme in March, covering motor finance agreements taken out between April 2007 and November 2024 where commission was paid by lenders to brokers and not properly disclosed. As Insurance Business reported at the time, it was valued at around £9.1 billion and described as one of the largest remediation exercises since PPI.
For insurers, the delay prolongs uncertainty over how and when liabilities will land on their books. The scheme crystallises PI and D&O exposures around past commission models, disclosure and governance. It also raises questions about add-on products sold alongside motor finance, such as GAP insurance, where similar conflicts can arise.
Insurance Business has previously reported that the redress process is likely to drive increased PI notifications from lenders, brokers, law firms and claims management companies, and to keep pressure on capacity and pricing for motor-related PI and financial institutions business.
A no-scheme outcome would not remove that exposure. It could instead see complaints and litigation return to a case-by-case process, potentially costing more to resolve and making losses harder to predict.
For brokers placing PI and D&O for lenders, motor dealers and credit brokers, the February date sets a clear horizon for renewals. Clients renewing before a judgment should make sure notifications are up to date and that their disclosure to insurers reflects both possible outcomes. Insurers are likely to scrutinise how prepared firms are, operationally and financially.
Brokers with motor dealer clients who sold GAP or other add-on products alongside finance should also review how those sales were handled, since conduct questions around commission may not stop at the finance agreement itself.
