The FCA’s motor finance compensation scheme was partially suspended on 2nd July 2026 following a decision from the Upper Tribunal, while challenges from four commercial parties (Consumer Voice, represented by Courmacs Legal, Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance) are heard.
The challenges are expected to be considered by the Upper Tribunal either between 14th–18th December 2026 or 16th–26th February 2027, depending on whether any of the challenging parties apply for further expert opinion or disclosure of information.
What the FCA’s announcement means for motor finance firms
As a result of the suspension, motor finance firms are not currently required to calculate or pay compensation or issue communications about compensation owed under the scheme while the legal process continues. However, the FCA has made clear that this should not be treated as a pause on all activity. Several parts of the programme are expected to continue with firms still preparing for the eventual resolution of the process.
Four key takeaways for firms to consider now include:
1. The compensation scheme remains the FCA’s preferred route
One of the most important points in the FCA’s statement is what has not changed. Despite the legal challenge, the regulator continues to view the compensation scheme as the quickest way to deliver redress to affected customers. The partial suspension is intended to avoid firms carrying out work that may need to be repeated if the challenge succeeds, while still allowing practical preparations to continue.
For firms that have already spent time assessing complaint volumes, reviewing historic agreements or developing redress programmes, this provides some reassurance that much of that work remains relevant. The FCA has also said it will defend the scheme robustly, reinforcing its view that a structured compensation approach remains the preferred way forward.
2. Preparation continues to matter
The FCA still expects firms to identify relevant complaints and agreements by gathering information on commission arrangements and disclosure practices. This includes working with brokers where relevant and cooperating with the Financial Ombudsman Service (FOS) where complaints have been referred.
While awaiting the final outcome, firms are likely to benefit from a clear understanding of their historic lending arrangements, available data and customer populations. This continued focus on preparation reflects the FCA’s aim of keeping progress moving while parts of the scheme remain under legal review.
3. Keeping customers informed remains important
Some communication obligations remain in place. The FCA expects lenders to keep complainants updated on developments, including what the partial suspension means, when the legal challenge will be heard and how complaint-handling and compensation timelines may be affected.
Firms are also expected to notify complainants who are not owed compensation where the complaint falls outside the scheme’s scope or does not involve any unfair features.
4. Flexibility is as important as preparedness
Alongside preparations for the scheme, the FCA has asked lenders to plan for the possibility that the scheme – or parts of it – could be quashed by the Tribunal. If that happens, firms may need to manage complaints through existing complaint-handling processes rather than a dedicated compensation scheme.
This does not mean the FCA expects the scheme to fail. Rather, it reflects the need for practical contingency planning while the legal process continues. For firms, the priority is not to predict the outcome but to retain sufficient flexibility to respond effectively once there is greater clarity.
Using the suspension period to stay ready
Although compensation calculations and payments are suspended, firms are still expected to continue relevant preparatory activity, maintain engagement with customers and remain ready for different possible outcomes.
The FCA’s states that this period should be viewed as one of continued preparation rather than inactivity. Firms that use the time to strengthen their understanding of complaints, data and operational requirements will be better placed to respond once the legal challenge concludes.
Support with motor finance preparations
As the motor finance landscape continues to evolve, firms will need to stay focused on preparation, customer outcomes and operational readiness. Momenta supports motor finance firms with experienced people, scalable delivery and practical operational expertise to manage complaint volumes and support effective programme delivery.
With flexible resource and proven sector experience, Momenta is helping firms stay ready for the next phase of activity and respond with confidence.
