Bite-size: Upper Tribunal partially suspends motor finance redress scheme

The Upper Tribunal has made an order partially suspending the FCA's motor finance consumer redress scheme on terms agreed between the FCA and the parties challenging it.

What has happened
The Tribunal has confirmed it will hear the substantive legal challenge on 14 to 18 December 2026 or 16 to 26 February 2027 with the exact dates dependent on any applications for further expert evidence or disclosure.

The partial suspension allows firms to continue preparing for the scheme and to progress complaints so far as possible, while avoiding work that may need to be repeated if the challenge succeeds. It also brings forward certainty for some consumers, by requiring firms to tell complainants who are not owed compensation under the scheme, subject to limited exceptions.

Why it matters

This is the first formal Tribunal order affecting the scheme's operation, rather than a voluntary FCA pause, and it fixes a hearing timetable that pushes any judgment into the first half of 2027 at the earliest. Firms are not required to calculate or pay redress, or send compensation communications, in line with the original scheme timetable until the Tribunal process concludes, but obligations that are not suspended remain fully in force.

The FCA has confirmed it is supervising firms against a central planning assumption that if the scheme, or parts of it, are quashed, there would be no complaints pause and no compensation scheme at all, reverting to a complaint-led and Financial Ombudsman Service-based approach. This materially raises the importance of financial and operational contingency planning now, rather than waiting for the Tribunal's outcome.

What firms need to know

• Firms are not required to calculate or pay redress, or send scheme-related compensation communications, on the original timetable while the suspension is in effect.

• Obligations that continue regardless of the suspension include: identifying relevant complaints and agreements; gathering commission and disclosure data, including from brokers; telling non-scheme-eligible complainants the outcome of their complaint by the relevant deadline; and cooperating fully with the Financial Ombudsman Service.

• Limited exceptions to the "tell complainants" obligation apply where a firm considers a complaint was out of time when the scheme was made, or where the firm relies on the "captive lender" exception for contractual tie complaints.

• If a firm needs more time to notify consumers that they are not owed compensation, the FCA will not treat this as non-compliance provided consumers are told within 7 weeks of the relevant scheme deadline.

• The FCA expects the challenging lenders, at a minimum, to contact all of their complainants individually to explain the legal challenge, the partial suspension, and the resulting delay to compensation payments.

• If the scheme is upheld and not appealed, the FCA expects payments to begin in 2027; if it is overturned in whole or in part, the FCA will need to decide next steps, which could include instructing complaint-by-complaint resolution or a revised scheme facing further challenge, delaying compensation until 2028 or beyond.

What firms should do now

• Continue all non-suspended preparatory work, including identifying in-scope agreements, gathering brokerage and commission disclosure evidence, and maintaining broker cooperation within the one-month document request deadline.

• Meet the deadlines for telling non-eligible complainants they are not owed compensation: 18 November 2026 for post-April 2014 agreements complained about by 30 June 2026, and 18 January 2027 for pre-April 2014 agreements complained about by 31 August 2026.

• Review financial and operational contingency planning on the assumption that the scheme could be quashed entirely, ensuring adequate capital and liquidity are held in UK regulated entities, including UK entities within international groups.

• Keep complainants updated on the Tribunal timetable, the effect of the partial suspension, and the likely impact on when complaints will be resolved and compensation paid.

• Engage promptly with FCA supervisors if there are concerns about meeting the revised deadlines or expectations under the partial suspension.