Friday, July 3, 2026
FCA motor finance redress scheme partially suspended: what firms and complaint teams need to do now
In this article, we're going to discuss:
Updated: 03 July 2026
The FCA motor finance redress scheme has been partially suspended following legal challenges brought by four commercial parties.
The challenges have been brought by Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance and Consumer Voice, represented by Courmacs Legal.
The FCA continues to support the scheme and has said it will defend its decision robustly, describing the scheme as the quickest, fairest and most efficient way to compensate consumers.
The Upper Tribunal is expected to hear the challenges either from 14 to 18 December 2026 or from 16 to 26 February 2027. The final hearing dates will depend on whether further expert evidence or disclosure is permitted.
Until the legal process concludes, firms don’t have to calculate or pay compensation under the scheme or send communications telling customers how much compensation they’re owed.
Some parts of the scheme remain in force.
Lenders must continue identifying relevant complaints and agreements, retrieving commission and disclosure information, working with brokers and responding to customers who aren’t entitled to compensation, subject to limited exceptions.
For complaint teams, the position has become more complicated. They must continue progressing cases without knowing whether the current scheme will survive unchanged, be amended or be replaced by the usual complaint-led process.
Firms need case records, data and workflows that can support each possible outcome while preserving the work already completed.
For background on the judgment that preceded the scheme, read our explainer on the Supreme Court motor finance ruling on discretionary commission.
What has been suspended under the FCA motor finance redress scheme?
Redress calculations, compensation payments and communications confirming that compensation is owed have been suspended under the FCA motor finance redress scheme.
The suspension affects redress calculations, compensation payments and communications telling customers that compensation is owed. Other parts of the scheme remain in force, including requirements to identify relevant agreements, retrieve information and issue certain no-compensation decisions.
This article has been updated to explain the revised position and the work firms must continue carrying out.
What does the FCA motor finance redress scheme cover?
The FCA motor finance redress scheme covers regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024.
Rather than creating one scheme, the FCA created two statutory schemes to reflect differences in the legal and regulatory backdrop across these periods:
Scheme 1: 6 April 2007 to 31 March 2014
Scheme 2: 1 April 2014 to 1 November 2024
The FCA defined the period, narrowed the rules and gave firms a clearer basis for identifying relevant cases, gathering information and preparing to pay redress.
These remain the rules of the scheme as currently made. However, parts of the scheme have been suspended while the Upper Tribunal considers the legal challenges.
Depending on the outcome, the rules could remain in place, be quashed in part or no longer provide the route through which historic motor finance complaints are resolved.
Which motor finance agreements are covered by the FCA redress scheme?
The FCA redress scheme covers qualifying motor finance agreements involving discretionary commission arrangements, high commission arrangements or certain tied arrangements.
Although the FCA’s scheme is large in scale, the final rules draw much clearer lines around which arrangements are in scope and which fall outside it.
In broad terms, the scheme focuses on three types of arrangement:
discretionary commission arrangements;
high commission arrangements; and
certain tied arrangements between a broker and lender.
The result is a tightly defined redress framework with clearer boundaries around what counts as unfair for scheme purposes.
The FCA has also narrowed the scope through specific exclusions and thresholds. The final guidance states that some agreements fall outside the scheme, including certain low-value commission cases, 0% APR agreements and high-value loans representing the top 0.5% of agreements written in any given year covered by the scheme.
The FCA’s analyst briefing also says that tighter eligibility reduced the estimated number of agreements captured from 14.2 million at consultation stage to 12.1 million in the final scheme.
For firms, the clearer scope places greater pressure on getting classification right.
That work must continue during the partial suspension. Firms still need to identify which agreements are relevant and establish whether any of the three unfair features are present.
How does the FCA motor finance redress scheme decide which cases qualify?
The FCA motor finance redress scheme decides which cases qualify by applying defined eligibility tests, thresholds, exclusions and unfairness criteria.
During the consultation stage, there was more uncertainty around how unfairness might be assessed across different fact patterns.
The final scheme is narrower. It sets defined triggers, clearer thresholds, more explicit exclusions and less room for firms to treat similar cases in very different ways.
From an execution point of view, this should make the scheme more workable at scale.
This approach also places more weight on accurate execution.
The more rules-based a scheme becomes, the more pressure it puts on firms to classify cases correctly, apply exclusions properly and evidence decisions clearly the first time.
The defined rules reduce some grey areas and increase the importance of process quality.
It also changes the nature of later disputes, with greater focus on whether the scheme rules were applied properly.
For complaint teams, that makes records, decision-making and customer communications even more important.
The Upper Tribunal challenges create further uncertainty around the scheme itself. Firms must still gather the information that will determine how each agreement should be treated.
What must firms continue doing while the motor finance scheme is suspended?
Firms must continue identifying relevant complaints and agreements, retrieving records, progressing non-suspended issues and issuing eligible no-compensation outcomes.
Firms must continue to:
identify complaints and agreements that may fall within the scheme;
gather commission and disclosure information, including information held by brokers;
respond to customers who aren’t owed compensation by the applicable scheme deadline, subject to specific exceptions;
deal with aspects of mixed complaints that fall outside the scheme;
work with claims management companies and law firms where customers appear to have more than one representative; and
cooperate fully and promptly with the Financial Ombudsman Service on complaints already referred to it.
Brokers must provide information requested by lenders, or confirm that they don’t hold it, within one month of receiving the request.
Firms aren’t currently required to calculate or pay redress under the scheme. They also don’t have to tell customers that compensation is owed while the Upper Tribunal process remains unresolved.
This creates an unusual operational split.
Investigation, identification and data collection must continue. Some steps that would ordinarily move a case towards a final outcome are paused.
Complaint teams will need to record exactly what has been completed, what remains suspended and what action will be required when the legal position becomes clearer.
Which motor finance customers must still receive a complaint outcome?
Customers must still receive an outcome where their complaint falls outside the scheme or their agreement doesn’t contain one of the three qualifying unfair features.
Lenders must continue issuing outcomes where a complaint falls outside the scheme or where an agreement doesn’t contain one of the three unfair features required for compensation:
a discretionary commission arrangement;
a high commission arrangement; or
a tied arrangement.
There are exceptions where the firm considers the complaint was already out of time when the scheme was made or where the complaint concerns a contractual tie and the lender relies on the captive lender exception.
For agreements beginning on or after 1 April 2014, customers who complained by 30 June 2026 and aren’t owed compensation should generally receive an outcome by 18 November 2026.
For agreements beginning before 1 April 2014, customers who complain by 31 August 2026 and aren’t owed compensation should generally receive an outcome by 18 January 2027.
Where a complaint is made after the relevant cut-off date, the firm should generally respond within five months if no compensation is owed.
The FCA has allowed firms an additional seven weeks beyond the relevant scheme deadline before it will treat a delay as non-compliance or consider enforcement action.
This reflects the time taken to agree the suspension arrangements rather than a permanent extension of the scheme timetable.
These decisions will need careful controls.
Firms must distinguish between cases that can receive an outcome, those covered by one of the exceptions and cases that must remain open pending the Tribunal process.
What operational challenges does the motor finance redress scheme create?
The motor finance redress scheme creates operational challenges around historic records, case classification, multiple deadlines, customer communication and consistent decision-making at scale.
In practice, complaint teams must still make the scheme work in live operational environments.
Many will be dealing with historic records, older commission models, incomplete data, ongoing complaint volumes, internal governance and pressure to get decisions right the first time.
The partial suspension adds another layer to this work.
Teams must now distinguish between actions that remain mandatory and those that are suspended. Meanwhile, regular complaint handling activity must continue outside the scheme.
They also need to manage different deadlines according to the agreement date, the complaint date, whether compensation is owed and if an exception applies.
Delivery depends on firms applying the rules consistently across large volumes of cases and explaining the current position clearly to customers.
Consistency is hard to achieve when records are old, systems are fragmented, and every mistake exposes the firm to wider risk.
What should firms prepare for while the motor finance scheme is challenged?
Firms should prepare for the current scheme to continue, be amended or be replaced by an individual complaint-led process.
The FCA then published its framework, moving firms towards implementation. The Upper Tribunal challenges mean firms can no longer base their operational planning on the assumption that the current scheme will proceed unchanged.
There are several possible outcomes.
The Upper Tribunal could uphold the scheme, allowing firms to resume calculations and compensation payments under the existing rules.
It could quash parts of the scheme, requiring the FCA to decide whether to consult on revisions.
The scheme could also be overturned, leading the FCA to require historic motor finance complaints to be resolved through the usual complaint-led and supervisory process.
The FCA has told lenders to plan rigorously for the possibility that there will be no compensation scheme, and no complaint handling pause.
Under this scenario, firms would need to resolve historic complaints individually within the usual statutory timelines.
This could produce a substantial increase in complaint volumes and Financial Ombudsman Service referrals. The Financial Ombudsman Service is already preparing for the potential uplift.
Firms therefore need more than a scheme implementation plan.
They need complaint data, case records, operational capacity and financial resources that can be redirected if the legal outcome changes the route through which cases must be resolved.
What does the motor finance redress scheme mean for lenders and brokers?
Lenders remain responsible for progressing affected complaints, while brokers must help retrieve commission, disclosure and agreement information within the FCA’s required timescales.
Brokers must continue helping lenders retrieve the information needed to identify commission arrangements and disclosure practices. When a lender requests documents or information, the broker must provide it or confirm it doesn’t hold the information, within one month of the request being made.
Some customers will receive a decision confirming that they aren’t owed compensation. Others will remain in the process while the legal challenge continues.
Customers may also hear about the suspension in the media before their lender contacts them and direct their frustration to the dealer or broker first, even though the lender remains responsible for the scheme outcome.
This creates a second layer of risk around enquiries, complaints and customer handling.
For dealers, it could mean more inbound complaints, more requests for records and more pressure to explain a scheme they don’t control.
Lenders need to manage the work across the distribution chain. Unprepared brokers, dealers or partner channels can quickly fragment the customer experience.
If communication is unclear, the scheme could expose a familiar weakness in complaint journeys; customers are caught in the middle, not really knowing what’s going on.
What records must firms retrieve for motor finance complaints?
Firms must retrieve agreement, commission, disclosure, broker, customer and complaint records needed to classify each case and support the eventual outcome.
Record retrieval could be problematic because the scheme reaches back to agreements entered into from 6 April 2007. Firms may no longer hold complete records where information was deleted in line with the regulatory requirements and data retention policies that applied at the time, including the UK GDPR principle that personal data shouldn’t be kept for longer than necessary.
The FCA has since introduced specific preservation requirements for records that could be relevant to motor finance commission complaints, but those rules can’t recreate information that had already been lawfully deleted. Firms may therefore be working with partial files, legacy systems, missing broker records and gaps in the evidence needed to classify older agreements.
This work isn’t suspended.
Firms must continue gathering the data needed to identify commission arrangements and disclosure practices, including information held by brokers.
Where information is missing, the case record should show what was requested, when it was requested, what was received and what basis has been used for any conclusion.
The work completed now needs to remain usable if the current scheme continues, changes or is replaced by individual complaint handling.
A firm that gathers the information without recording it against the right agreement and complaint may find itself repeating much of the exercise when the legal position changes again.
What should firms tell customers during the motor finance scheme suspension?
Firms should tell customers what work is continuing, what’s been suspended, how the legal challenge affects their complaint and when they can expect another update.
The FCA expects lenders to update complainants about when the legal challenge is likely to be heard, what the partial suspension means and how it may affect the timetable for resolving their complaint or paying compensation.
The three lenders challenging the scheme, Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance, are expected, at a minimum, to contact all their complainants individually and explain that they’ve brought a legal challenge, which has led to the partial suspension and delayed compensation payments.
Generic holding messages will need to be reviewed carefully.
Customers should understand that lenders are continuing to identify agreements and retrieve records.
Communications must also avoid suggesting that compensation has been decided or is about to be paid while those parts of the scheme are suspended.
Customers should be able to understand:
whether their complaint remains in the scheme;
what work the firm can continue carrying out;
why a decision or payment may be delayed;
whether any part of a mixed complaint will continue separately; and
when they can expect another update.
If these messages are late, unclear or inconsistent across lenders, brokers and dealers, the process could create fresh complaints of its own.
What fraud risks could arise from the motor finance redress scheme?
The motor finance redress scheme could lead to impersonation, misleading compensation messages, duplicate representation and requests for unnecessary fees or personal information.
The delay and uncertainty caused by the legal challenge may create further opportunities for misleading messages, impersonation and claims that a customer must pay someone to remain eligible.
Customers may also receive communications from lenders, brokers, claims management companies and legal representatives around the same complaint.
Where someone appears to have more than one representative, the FCA expects firms and claims companies to work together to resolve the duplication.
Clear records of the customer’s representative, authority and communication history will be needed to reduce confusion and avoid information being sent to the wrong party.
Fraud controls, customer verification and clear communication therefore remain part of the scheme work, even while compensation calculations and payments are suspended.
The scheme requires reliable records, controlled communications and joined-up ownership across the process.
What happens next with the FCA motor finance redress scheme?
The Upper Tribunal will hear the legal challenges before the FCA decides whether the current scheme continues, changes or gives way to individual complaint handling.
The hearing is expected to take place either in December 2026 or February 2027, with judgment following in the subsequent months. Further appeals could extend the timetable.
If the scheme is upheld and the judgment isn’t appealed, the FCA expects compensation payments to begin during 2027.
If the scheme is overturned in whole or in part, the FCA will need to decide what happens next.
It could consider a revised scheme, although the FCA has warned that further consultation and legal challenge could delay compensation until 2028 or later.
Alternatively, lenders could be directed to resolve affected complaints individually under the usual complaint handling process.
This would ordinarily require a response within eight weeks and would allow dissatisfied customers to refer their cases to the Financial Ombudsman Service.
There’s also uncertainty around how the current rules would be applied in individual cases if the scheme is upheld.
Questions around case classification, rebuttal evidence, historic records, communications and whether the rules have been applied properly may still generate challenges.
Customers who believe their lender hasn’t followed the scheme rules would be able to ask the Financial Ombudsman Service to review the decision.
The wider legal backdrop also remains relevant. Cases such as, Clydesdale Financial Services Ltd v Financial Ombudsman Service Ltd and Black Horse Ltd v Angel & Others, show that legal and complaint-handling risks remain despite the FCA confirming its preferred approach.
Firms can’t yet know which route they will be required to follow.
The work being carried out now should therefore remain usable under the current scheme, an amended scheme or an individual complaint-led process.
How should complaint teams prepare for the next motor finance scheme update?
Complaint teams should prepare by keeping complete case-level records that can support the current scheme, an amended scheme or ordinary complaint handling.
It should focus on making sure the work already completed can still be used, whatever happens next.
Complaint teams should be able to identify:
every relevant agreement and linked complaint;
which statutory scheme and date range apply;
the commission arrangement and disclosure evidence;
whether any unfair feature has been identified;
whether the case is outside the scheme;
whether an exception applies;
which aspects of a mixed complaint must continue;
the customer’s appointed representative;
which records have been requested from a broker;
what activity has been completed;
what activity is suspended; and
the next action under each possible route.
This information needs to exist at case level rather than being reconstructed from inboxes, spreadsheet notes and separate folders when the Tribunal reaches a decision.
Firms also need to consider capacity.
If the scheme is upheld, teams may need to resume calculations, communications and payments across a large case population.
If it’s amended, cases may need to be reassessed against revised rules.
If the scheme falls away, historic complaints may need to move into an individual complaint process with usual regulatory deadlines and potential referrals to the Financial Ombudsman Service.
The exact workflow may change. The underlying case history and evidence shouldn’t have to be pieced together again.
FCA motor finance redress scheme FAQs
These FAQs explain the current status of the FCA motor finance redress scheme, what’s been suspended and what firms must continue doing.
See how Complyr supports complex complaint operations
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