WATCH: Consumer expert Harry Wallop explains why compensation has now become available for up to 12 million car finance agreements
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The UK’s Upper Tribunal has confirmed that it will hear legal challenges to the car finance compensation scheme next year.
Legal challenges to the Financial Conduct Authority’s redress scheme were lodged earlier this year, prompting the scheme to be partially suspended.
The Upper Tribunal will now hear the legal challenges to the FCA’s motor finance compensation scheme between February 16 and 26, 2027.
Legal challenges were submitted by Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and Consumer Voice, represented by Courmacs Legal.
The FCA has outlined that the scheme remains partially suspended, but reminded firms that they must keep preparing for an outcome.
Firms must also progress complaints as far as possible, which has prompted lenders to set aside hundreds of millions of pounds.
The regulator described its scheme as the “quickest, fairest and most efficient”, adding that it would defend it “robustly”.
An Upper Tribunal judgment on the legal challenges is expected in the months following the hearing in February next year.
When the scheme was confirmed in March, the FCA stated that 12.1 million agreements were eligible for compensation.
The total cost of the scheme was estimated to be £9.1billion, with the average redress rising to £829 per agreement.
Prior to the legal challenges, the FCA planned for the vast majority of claims to be settled by January 2028.
However, FCA CEO Nikhil Rathi said there was nothing stopping firms from issuing compensation to impacted drivers as soon as the scheme was announced.
Providing guidance to consumers, the FCA stated that lenders may tell drivers that they are not owed compensation, even if they have complained.
Until the legal process concludes, lenders are not required to calculate or pay compensation under the scheme.
It stressed that drivers do not need to use a law firm or claims management company, as they can charge up to 36 per cent of any compensation.
Reacting to the Upper Tribunal’s decision to hear the case, Alex Neill, co-founder of Consumer Voice, said the consumer rights organisation is ready to take its challenge to trial.
She told GB News: “We remain resolute and confident in our challenge, the only one made on behalf of millions of consumers who are being short-changed by the redress scheme.
“Now the February trial date has been fixed, the FCA and the lenders must not be allowed to delay it further. We want to get on with the case.”
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