February 2027 date for FCA motor finance scheme challenge

The Upper Tribunal has confirmed it will hear the legal challenges to the Financial Conduct Authority (FCA) motor finance compensation scheme between 16 to 26 February 2027, the later of the two proposed dates for the hearing, with judgment expected in the following months.

The challenges have been brought by three captive lenders – Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – and by Consumer Voice, represented by Courmacs Legal.  

As result, the FCA’s industry-wide scheme, due to start in the summer of this year, is currently partially suspended. However, the regulator is reminding firms that they must keep preparing for the scheme and progress complaints as far as possible.

The FCA advice is that lenders must comply with the scheme rules that remain in force. This includes sending letters to some consumers not owed compensation under the scheme.

It also cautions that firms should plan for the possibility that, if the scheme or parts of it are quashed, there may be no motor finance compensation scheme and no complaint handling pause. In that scenario, lenders would need to be operationally and financially ready to resolve complaints through the usual complaint-handling process and within the usual statutory timescales.

In a statement, the FCA said: “We expect lenders to plan rigorously for this scenario, make the necessary financial provisions and engage with their auditors.

“We encourage firms to contact us if they have questions. We will keep our firm web page updated with the latest information.”

The earliest the Tribunal could have heard the challenge was in late December, but confirmation of the February 2027 date further extends the uncertainty for lenders, several of whom have been ramping up their provision for potential compensation claims. Volkswagen Financial Services UK (VWFS) has set aside £725 million, the largest provision yet announced by a captive, while BMW Financial Services has increased the sum earmarked to meet claims under the FCA scheme to £611 million, plus an additional £25.5 million for claims that fall outside its scope. 

Responding to the news of the Upper Tribunal’s timetable, the Finance & Leasing Association (FLA) said: “While the timetable extends the period of uncertainty for consumers and lenders, securing legal clarity is essential. Any redress arrangements must be fair, proportionate, and workable, providing confidence for consumers and certainty for the market.

“Resolving these challenges is therefore about more than the implementation of a redress scheme. It is about maintaining trust and supporting a competitive, sustainable market that continues to provide access to affordable motor finance.”

Join us at the Finance Connect UK Autumn Conference on 24 November 2026 at Kings Place, London, where the auto finance stream will provide a fully up-to-date “state of the nation redress” update. A keynote and workshop with Wayne Gibbard from Shoosmiths will explore the latest developments and what they mean for motor finance lenders as they prepare for the next stage of the redress process.

View the auto finance programme and book your place.