Millions of motorists waiting for compensation from the UK's ongoing car finance scandal may have to wait until at least 2027 after the Financial Conduct Authority (FCA) warned that legal challenges could significantly delay its proposed redress scheme [1]. 

The regulator had been expected to begin distributing compensation as early as 2026 through a £9.1bn industry wide scheme covering around 12.1 million finance agreements signed between 2007 and 2024 [2]. However, a series of legal challenges has now cast uncertainty over both the timing and structure of the programme.

Speaking before the Treasury Committee, FCA executives warned that affected consumers could face further delays while the courts consider challenges brought against the regulator's plans [3].

FCA scheme faces legal battle

The FCA is currently facing challenges from Volkswagen Financial Services, Mercedes Benz Financial Services, Crédit Agricole Auto Finance and consumer campaign group Consumer Voice [4].

The challenges relate to the regulator's proposed car finance compensation framework, which was designed to address concerns that consumers were overcharged because of commission arrangements between lenders and motor dealers.

Many of these arrangements were not fully disclosed to customers, leading to allegations of widespread car finance mis-selling across the industry.

The FCA's proposed scheme would provide compensation without requiring every affected consumer to submit an individual complaint. However, the legal challenges mean the regulator will now have to defend the programme before the Upper Tribunal.

Sarah Pritchard, the FCA's deputy chief executive, told MPs that even if the regulator successfully defends the scheme, compensation payments are now likely to be pushed into 2027 [5].

"If it is shot down, then we will need to consider what the options may be," she said.

Complaints route could add years to the process

The FCA has repeatedly argued that a central redress scheme would be the fastest and fairest way to compensate consumers.

In a letter to MPs, FCA chief executive Nikhil Rathi warned that a complaints based system could cost lenders more than £6bn extra and take up to three years longer to resolve [6].

Such an approach would likely require consumers to pursue individual car finance claims or PCP claims through lenders and the Financial Ombudsman Service rather than receiving compensation automatically through a coordinated scheme.

The regulator also warned that the Ombudsman was not designed to handle claims on this scale.

Treasury Committee member John Grady MP questioned whether the FCA's estimates were optimistic [7], noting that further appeals could potentially extend the legal process beyond the regulator's current forecasts.

Some lenders are exploring early settlements

Despite the legal uncertainty, there are signs that parts of the industry are already exploring potential solutions.

According to reports, some lenders are considering whether they can make settlement offers before the legal process concludes, particularly in cases where there is strong evidence that commission arrangements were not properly disclosed.

The FCA has indicated that it would welcome proposals that deliver fair outcomes for consumers while maintaining consistency across the market.

Although no formal programmes have been announced, the discussions raise the possibility that some motorists could receive a car finance refund or a PCP refund before the wider redress scheme is finalised.

Billions of pounds remain at stake

The proposed scheme is one of the largest consumer compensation programmes ever considered in the UK financial sector.

The FCA estimates that around 12.1 million finance agreements could fall within scope [8], with average compensation expected to be approximately £829 per eligible agreement [9].

The investigation covers commission arrangements linked to personal contract purchase agreements and other forms of vehicle finance. As awareness of the issue has spread, a growing number of motorists have been checking to see if they might be eligible for a claim.

For drivers who think they may have been mis-sold car finance, the latest news is not the cancellation of redress, but that the path to compensation may be longer than expected.

FCA warns of wider consequences

The legal battle is also creating additional costs for the regulator itself.

The FCA estimates that defending the challenges will add approximately £2.7m to its costs [10] and require resources to be diverted from other regulatory work.

Pritchard acknowledged that there would be trade offs but stressed that the regulator remained focused on securing compensation for consumers.

"Consumers have been waiting a very long time to be compensated," she told MPs. "One way or another, they need to be compensated."

What happens next?

The decision from the Upper Tribunal hearings is set to be a major influencer on the future of the FCA car finance compensation programme.

Should the regulator win the case to go ahead with its proposals as is, the scheme could see motorists start receiving their refunds from 2027. If the scheme is found to be unfit, the FCA will need to go back to the drawing board, or could be forced to issue new consultations, or even consider switching to a complaints led process.

For the time being, motorists looking for a car finance refund check or want to find out more about a potential PCP claim will need to hold fire until further clarity is provided as one of the UK’s largest financial redress schemes enters a new phase.

As hopes of a wave of payouts 2026 has been quashed, the prospect of consumers affected by the car finance scandal receiving compensation is back on the table.

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References:

1. the Financial Conduct Authority (FCA) warned that legal challenges could significantly delay its proposed redress scheme - https://www.theguardian.com/business/2026/jun/09/car-finance-payouts-delayed-legal-challenges-fca-complaints
2. The regulator had been expected to begin distributing compensation as early as 2026 through a £9.1bn industry wide scheme covering around 12.1 million finance agreements signed between 2007 and 2024 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
3. FCA executives warned that affected consumers could face further delays while the courts consider challenges brought against the regulator's plans - https://www.belfasttelegraph.co.uk/business/uk-world/car-finance-payouts-likely-to-be-delayed-until-at-least-2027-warns-watchdog/a/156381993.html
4. The FCA is currently facing challenges from Volkswagen Financial Services, Mercedes Benz Financial Services, Crédit Agricole Auto Finance and consumer campaign group Consumer Voice - https://consumervoice.uk/cars/fca-car-finance-compensation-challenge/
5. Sarah Pritchard, the FCA's deputy chief executive, told MPs that even if the regulator successfully defends the scheme, compensation payments are now likely to be pushed into 2027 - https://www.thetimes.com/business/companies-markets/article/car-finance-compensation-payouts-delayed-3rkvxhqzg
6. FCA chief executive Nikhil Rathi warned that a complaints based system could cost lenders more than £6bn extra and take up to three years longer to resolve - https://cardealermagazine.co.uk/car-finance-compensation-payouts-pushed-back-until-at-least-2027/324762
7. Treasury Committee member John Grady MP questioned whether the FCA's estimates were optimistic - https://committees.parliament.uk/publications/53492/documents/298885/default/
8. The FCA estimates that around 12.1 million finance agreements could fall within scope - https://www.fca.org.uk/publication/policy/ps26-3.pdf
9. average compensation expected to be approximately £829 per eligible agreement - https://www.bbc.com/news/live/czx94evl5lrt
10. The FCA estimates that defending the challenges will add approximately £2.7m to its costs  - https://www.theguardian.com/business/2026/jun/09/car-finance-payouts-delayed-legal-challenges-fca-complaints