Are you following developments in the FCA’s car finance compensation scheme? Then you’ve probably seen reports that legal challenges could delay compensation payments until 2027.
The FCA has made clear that it will defend its scheme, and that it’s committed to ensuring fair outcomes for consumers. And recent comments from FCA Chief Executive Nikhil Rathi suggest that some motor finance firms are exploring potential solutions to resolve complaints and compensate consumers, despite the uncertainty surrounding the wider scheme.
Let’s jump in and take a closer look at the latest developments.
Why is the FCA’s car finance compensation scheme being delayed?
The FCA announced in March 2026 that it was introducing an industry-wide redress scheme to compensate car finance consumers who were treated unfairly between 2007 and 2024. This followed an extensive investigation into motor finance commission arrangements.
The FCA has suggested that agreements that involved discretionary commission arrangements (where brokers increased interest rates to earn higher commissions), as well as those with particularly high commission arrangements or contractual ties that weren’t revealed, would be considered for compensation. It estimated that around 12.1 million car finance agreements would be covered by the scheme, with compensation expected to total £9.1 billion.
However, the scheme is now facing legal challenges from both motor finance firms and a consumer campaign group. These challenges mean that the scheme now must be considered by a judge. As a result, there’s uncertainty about when the scheme will be implemented and when compensation payments might begin on a wider scale.
So, what exactly has the FCA said about potential payouts?
In a letter to the Treasury Committee dated 8 June 2026, Nikhil Rathi said: “Some firms have … said they want to resolve these liabilities now and they are exploring whether they can make settlement offers on complaints that would have been dealt with through the scheme if it were not for the legal challenges.”
He added that offers could include cases where there was strong evidence that commission arrangements between lenders and motor dealers had not been properly disclosed.
Of course, this doesn’t mean that all lenders will pay compensation imminently. However, it is still an important development as it suggests that firms are considering whether they can begin addressing complaints now, rather than waiting for the outcome of legal proceedings.
And is there any indication of when those legal proceedings will be resolved?
The legal challenges mean that the FCA scheme will now be considered by the Upper Tribunal. The case isn’t expected to be heard before October. So rather than payouts being made as early as this summer – as previously suggested – FCA Deputy Chief Executive Sarah Pritchard told the Treasury Committee that they’ll be delayed until 2027, provided the judge backs the scheme.
And if the scheme doesn’t receive backing, Nikhil Rathi’s letter indicates that other options would be considered: “… we would need to decide whether to consult again or drop the scheme in favour of a complaints-based approach alongside the use of our supervisory and enforcement powers.”
In other words, the FCA would either look again at introducing a compensation scheme or consumers could resolve complaints through existing routes, including the Financial Ombudsman Service and the courts.
What does this all of this mean for consumers?
The legal challenges facing the FCA’s redress scheme mean there is still considerable uncertainty about the timing and structure of an industry-wide compensation programme. That said, Rathi’s comments show that discussions are taking place about resolving some complaints before the scheme is finalised.
Ultimately, it’s wrong to assume that all progress has stopped simply because the FCA’s scheme is facing legal challenges. And while there are no guarantees, the comments provide a clear indication that compensation remains on the agenda.
If you think you could have been affected, don’t delay in making your complaint
Are you one of the many people unsure if your car finance agreement could be eligible for compensation? Rather than waiting, submitting a complaint now can help ensure that your case is reviewed. What’s more, it ensures that your position is recorded should firms decide to explore complaint resolution or settlement offers while the FCA scheme remains subject to legal challenge
For consumers who believe they may have been affected by car finance mis-selling, the message is clear: don’t assume that compensation is off the table, and don’t delay in making a complaint. You can complain directly to your lender. Alternatively, specialist legal advice can clarify your position and help you decide on next steps. If you’d like support or advice about a potential car finance claim, just click the link below to give us a few details and on of our specialists will be in touch.
Ready to check if you have a claim?
Simply use the link below to give us a few details and we’ll be in touch. There’s no obligation to go ahead – and no fees if your claim isn’t successful.
Check if you have a claim
