Car Finance Compensation: Payments Delayed as Legal Challenge Hearing Set for 16 to 26 February 2027

What happened: the car finance compensation hearing date

The Financial Conduct Authority (FCA) confirmed on Tuesday 13 October 2026 that the Upper Tribunal will hear the legal challenges to its motor finance compensation scheme between 16 and 26 February 2027. A judgment is expected in the following months.

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. The scheme is currently partially suspended, although firms must keep preparing for it and must progress complaints as far as possible.

The FCA says its scheme is the quickest, fairest and most efficient way to compensate consumers, and that it will defend it robustly. It has also told lenders to plan for the possibility that the scheme, or parts of it, could be quashed. In that case there may be no motor finance compensation scheme at all, and complaints would be handled through the usual complaint process and the usual statutory timescales.

The scheme itself covers motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker, usually the dealer, and key details of the commission arrangement were not told to the customer. The FCA estimates 12.1 million agreements are eligible, with average redress of £829 per agreement.

Key numbers

What it means for your money

The direct effect is timing. If you are waiting for car finance compensation, no payment has to be calculated or paid under the scheme until the legal process concludes. On the FCA timetable that means the February 2027 hearing first, then a judgment in the following months, so this money should not be counted in any budget for this winter.

Waiting does not mean doing nothing. If you have already complained, your lender may still write to tell you that you are not owed compensation. But some people may hear nothing until the legal process ends, and the FCA is clear that not receiving a letter does not necessarily mean you are owed compensation.

If you have not complained yet and you are concerned about an old car finance agreement, you can complain directly to your lender for free. You do not need a law firm or a claims management company. That matters, because those firms may charge up to 36% of any compensation.

Here is what that fee means in pounds, using the FCA average redress figure of £829 per agreement. A 36% fee on £829 is £298.44, which would leave £530.56. Complaining directly costs nothing, so the full £829 would stay with you. Your own figure will differ from the average, but the fee percentage works the same way on any amount.

Two cautions from the FCA. Do not sign up with more than one claims firm or law firm, because you may be charged multiple fees. And if you want to cancel an agreement with one, any cancellation fee must be reasonable and reflect the work actually done. Most car finance claims are still at an early stage, so check any fee demand carefully.

While you wait, it is also worth keeping your wider finances tidy. Our guide to checking your credit score free shows how to see the record lenders hold on you, at no cost.

What happens next: the timeline in one place

If the scheme is upheld, lenders will work under its rules. If it is quashed in whole or in part, the FCA says there may be no scheme, and complaints would fall back to the usual process. Either way, a complaint already made directly to your lender is on record at no cost to you.

Car finance compensation: your questions answered

When will car finance compensation be paid?

Not until the legal process concludes. The hearing runs from 16 to 26 February 2027 and judgment is expected in the following months. Until then, lenders do not need to calculate or pay compensation under the scheme.

I have not had a letter. Does that mean I am owed money?

No. The FCA says some consumers may not be told the outcome until the legal process concludes, so hearing nothing does not necessarily mean you are owed compensation.

Can I still complain about an old agreement?

Yes. If you are concerned about your car finance agreement and have not complained, you can complain directly to your lender for free. If your lender never contacts you, you can still complain to the firm by 31 August 2027.

Do I need a claims management company?

No. The FCA says you do not need to use a law firm or claims management company, and they may charge up to 36% of any compensation. On the FCA average of £829, that fee could be £298.44.

What if the scheme is cancelled by the court?

The FCA has told lenders to plan for that possibility. In that case there may be no compensation scheme and no complaint handling pause, and complaints would be resolved through the usual complaint handling process and statutory timescales.

Source: Financial Conduct Authority, “Motor finance legal challenge to be heard in February 2027”, published 13 October 2026, and “FCA confirms motor finance redress scheme”. Read the FCA statement.