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The FCA’s long awaited motor finance compensation scheme was finally announced on 30th March 2026 and very quickly afterwards, suspended. The announcement promised a flurry of compensation payments from banks to start towards the beginning of July 2026 but, following challenges to the scheme brought by 3 banks and the consumer campaign group, Consumer Voice, the FCA formally announced on 2ndJuly 2026 that the scheme would be suspended – but only partially.
The good news is that this does not mean the Scheme has been cancelled, nor does it mean that consumers have lost their right to complain or pursue a claim. However, it is likely to delay compensation payments while the legal position is resolved.
What has been suspended?
The suspension affects the parts of the Scheme that require lenders to calculate and pay compensation. Legal challenges to those rules are expected to be heard by the Upper Tribunal by February 2027 at the latest, with a judgement likely to be handed down towards the middle of that year.
If the Scheme proceeds after those hearings and there are no further appeals, compensation payments are likely to start in the latter part of 2027.
However, the suspension does not mean that all complaints have stopped or that lenders can ignore them. All banks are still required to carry out certain work on relevant motor finance agreements and complaints.
Should you still make acomplaint?
Yes, people who believe they have been mis-sold car finance should make a complaint or keep an existing complaint active. If you don’t, you will be placed at the back of the queue.
There may be deadlines that apply to complaints, and court claims are subject to separate limitation periods. Waiting for the outcome of the Scheme may not always be the right approach, particularly where a potential legal claim could become time barred.
The appropriate route will dependon the facts of the individual case.
Important dates
The FCA has confirmed that certain lender response deadlines still apply where a lender decides no compensation is owed:
Agreement started Complaint/Claim made by Notification due by
On or after 1 April 2014 30 June 2026 18 November 2026
Before 1 April 2014 31 August 2026 18 January 2027
For complaints made after these dates, lenders that decide no redress is payable should generally respond within five months of you making the complaint. These deadlines are not dates by which every consumer will be told whether they are receiving compensation.They apply mainly where a lender concludes that a complaint is outside the Scheme or that no redress is due. However, with the scheme rules far from concluded, it remains unclear whether someone who is refused compensation under the scheme should continue to complain. Firstly, the scheme rules may change and secondly, the scheme is not a true representation of the full extent of a person’s legal entitlement.
Once the scheme is eventually launched, banks should be contacting anyone who has not made a complaint who may be eligible for compensation – however, this may be based on contact information that is many years out of date.
For some, issuing court proceedings will be the only option for them to secure the compensation they deserve.
What happens next?
A lender may issue a Provisional Redress Decision or Final Response Letter stating that no compensation is payable. If you disagree, possible options may include asking the lender to reconsider, taking the complaint to the Financial Ombudsman Service, or considering court proceedings.
The current situation is frustrating, but the suspension is a delay, not the end of the motor finance compensation process. If you’ve engaged legal representatives to bring your complaint, then they will be able to guide you through the various options available to you in what continues to remain a complicated claims process.
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