The Financial Conduct Authority (FCA) has today announced an extension to its “pause” on final responses to motor finance complaints, giving itself additional time to finalise and implement a consumer compensation scheme. Here’s what you need to know.
1. Pause extended to 31 May 2026
The FCA has extended the pause to 31 May 2026. This allows the regulator time to finalise the design of a compensation scheme for consumers who have been treated unfairly, following legal clarity from the Supreme Court and High Court.
Motor finance companies also get extra time to prepare for the scheme. While the extension delays final responses for many complaints, it does not prevent complaints from being progressed - firms have been reminded by the FCA to continue working on cases so they’re ready to uses final responses the pause ends.
2. Likely compensation scheme and broad scope
The FCA is consulting on a scheme that is expected to cover the majority of complaints. Only a small number of complaints are likely to fall outside of the scheme. For those outside the scheme, firms may have up to eight weeks after 31 May 2026 to issue a final response, depending on when the complaint was received.
3. Leasing complaints excluded
Motor leasing complaints are not included in the compensation scheme and are not covered by the pause extension. Finance companies must begin issuing final responses for leasing complaints from 5December 2025.
4. Continued progress and record-keeping
In a letter to firms dated 3 December 2025, the FCA reminded providers to continue progressing all complaints. Firms are also required to retain relevant records until 11 April 2031. The FCA has warned that failure to do so would be treated “…treated as serious breach and may result in regulatory action”.
5. Final scheme rules expected in early 2026
The FCA plans to publish final rules for the scheme in February or March 2026. These rules will:
- Align with the end of the pause to prevent unnecessary responses before the scheme applies.
- Clarify how firms should handle complaints containing both scheme and non-scheme elements, ensuring consumers receive clear and consolidated responses.
6. Referrals to the Financial Ombudsman Service
The normal 6-month period that consumers have to refer a complaint to FOS, will now apply for any final responses sent after 29 January 2026.
What this means for consumers
- Most motor finance complaints will likely be included in the compensation scheme.
- Consumers whose complaints fall outside the scheme can still expect a prompt final response after the pause ends.
- Leasing complaints are not included in the extension and consumers should expect responses to their complaints from 5 December 2025.
- Keeping records and evidence is crucial if your complaint involves both scheme and non-scheme elements.
Jamie Patton, Managing Director of Johnson Law Group said: “At Johnson Law Group, we continue to be frustrated by the slow progress of the FCA – this extended pause takes the wait to 9 1/2 years since it first started investigating car finance. That is a staggering lack of ability to control the behaviour of the banks.”
Johnson Law Group will continue monitoring developments closely and will provide updates as the FCA finalises the scheme rules.
To see the full FCA statement, please click here.
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