Car finance compensation delay: 2027 hearing pushes back payouts

Drivers who may have been mis-sold car finance now face a car finance compensation delay into 2027. The Upper Tribunal has confirmed it will hear the legal challenges to the Financial Conduct Authority’s motor finance compensation scheme between 16 and 26 February 2027, the FCA said.

The regulator expects a judgment in the months after that hearing. Until the legal process concludes, lenders do not need to calculate or pay compensation under the scheme.

What has changed, and why payouts are on hold

The scheme is currently partially suspended. The FCA has challenges from three lenders, Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance, and from Consumer Voice, represented by Courmacs Legal. The regulator said: “Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly.”

The date has also slipped. Yahoo News UK reported that the case would be heard either on 14 December 2026 or on 16 February 2027, and that the FCA had been ready to start paying in July. The February date is about nine weeks later than the December option.

Consumer Voice co-founder Alex Neill said the parties blame each other for the delay. According to the Manchester Evening News, he said the FCA blames the lenders’ requests for extensive data disclosure and fresh expert evidence, while the FCA’s own approach to disclosure “has been heavily criticised by all parties”. Consumer Voice says the Tribunal has ordered the FCA to provide more of the data and analysis behind its payout calculations.

Who is affected and who pays

The BBC reported that the scheme covers about 12 million car loans taken out between April 2007 and November 2024, just over 40% of agreements in that period. It said the FCA expects average payouts of about £829 per mis-sold agreement, and a total cost of up to £9.1bn including administration. The BBC added that the industry is expected to cover the full cost, so the money comes from lenders rather than taxpayers.

Drivers lose out through waiting, and potentially through the amount. Consumer Voice is the only applicant arguing that drivers could get too little, and says the FCA’s rules could leave people “with less than they are fairly owed”. The three lenders are challenging the scheme from the opposite direction.

If the scheme is quashed, the FCA told lenders there may be “no motor finance compensation scheme and no complaint handling pause”. The BBC reported the FCA’s estimate that up to 19 million complaints would then need handling individually, taking three years and costing lenders £6bn more. Yahoo News UK reported that payouts could then slip to 2028 or later.

A worked example: what the wait and a claims firm can cost

Take the average payout of £829. A driver who complains directly to their lender pays nothing to do so, and keeps the full amount if it is awarded. A driver who signs up with a claims management company charging the maximum 36% the FCA mentions would hand over £298.44 and receive £530.56.

Even at the 30% figure FCA chief executive Nikhil Rathi told the BBC many law firms would like, the fee on £829 would be £248.70. Your own payout may be higher or lower, because, as the BBC reported, the amount depends on the degree of harm suffered. The arithmetic simply shows how much a claims firm can take from an average award.

The FCA also warns that cancelling an agreement with a claims firm or law firm may carry a fee, which must be reasonable and reflect the work done. Because most car finance claims are still at an early stage, it advises checking any fee demand carefully.

When will car finance compensation arrive? The timeline

The dates below come from the FCA, the BBC and Yahoo News UK. Nothing after the hearing is fixed, because it depends on the Tribunal’s ruling and any appeal.

If the challenge is rejected and not appealed, the FCA expects payments under the scheme to begin in 2027, according to Yahoo News UK. If the scheme is overturned in whole or in part, the FCA will have to decide what to do next. Yahoo also reported that the FCA is talking to lenders about “full and final” settlement offers that would let customers take money now.

What to do now

If you have not yet complained, you can do so directly to your lender for free. The FCA’s claims page explains how and lists lender contact details. Money Saving Expert has advised drivers to complain as soon as possible, saying that doing so yourself “likely means a quicker payout”.

If you have already complained, keep any letters from your lender and make sure it has your current address and contact details. The BBC reported that people whose details have changed could wait many months. The FCA also says that not receiving a letter does not necessarily mean you are owed compensation, because some people may not be told until the legal process ends.

Avoid signing up with more than one claims firm or law firm, as you may be charged multiple fees. If you are unhappy with how a firm handled your claim, the FCA suggests complaining to it directly and has published a template letter.

Your questions answered

Do I need to do anything if I have already complained?

The BBC reported that complaints have already been made about four million finance agreements, and that those people do not need to do anything. Lenders must keep progressing complaints as far as they can. They are not required to calculate or pay compensation under the scheme until the legal process concludes.

Does no letter mean I am not owed anything?

No. The FCA said your lender may tell you if you are not owed compensation, but some people may not hear until the legal process concludes. The BBC added that borrowers whose details lenders no longer hold can still make a claim.

Should I use a claims firm to speed things up?

The FCA says you do not need to, and nothing in its statement suggests a firm can bring the hearing forward. It says firms may charge up to 36% of any compensation. The scheme itself is free to use, as Nikhil Rathi told the BBC.