FCA forced to suspend elements of £9bn motor finance scheme

The Financial Conduct Authority (FCA) has been forced to suspend parts of its £9.1 billion car finance compensation scheme, delaying payouts for millions of motorists. The scheme aimed to compensate drivers overcharged for loans due to commission payments between lenders and car dealers from 2007 to 2024.

A hearing is set for December or February, where challenges from lenders and a consumer group will be addressed. The suspension means financial firms will not need to calculate or pay compensation to people owed money under the scheme until the legal process concludes.

The Finance & Leasing Association (FLA) has welcomed the Upper Tribunal’s decision to partially suspend elements of the Financial Conduct Authority’s (FCA) motor finance compensation scheme until it has determined the legal challenges before it.

The FLA  has said that it has continued to work closely with its members and the FCA to ensure the scheme is ready to be implemented. In the meantime, firms will continue preparing for the scheme and meeting the requirements that remain in force, while the Tribunal considers the appeals.

Although the partial suspension means compensation payments cannot begin until the legal process has concluded, it provides greater certainty for firms and consumers, avoids work that may need to be repeated if the challenges succeed, and allows the legal issues to be resolved before the scheme is fully implemented.

Richard Pinch, Senior Director at Broadstone, said “The FCA’s decision to partially suspend its motor finance redress scheme provides lenders with welcome operational clarity while the legal challenge is resolved. It removes the immediate pressure to calculate and pay compensation, helping firms avoid potentially duplicative work.

“However, lenders cannot afford to stand still ahead of the legal case at the end of this year or at the start of 2027. They will need to continue identifying eligible cases, gathering the necessary data and ensuring they have the operational capacity, capital and liquidity in place to respond quickly once the Tribunal reaches its decision.”