The motor finance redress scheme is partly suspended. The Upper Tribunal made the order at the start of July. The FCA confirmed it on 2 July 2026. Lenders no longer have to work out or pay compensation on the scheme timetable. Anyone who wants to join the proceedings as an interested party must apply by 11.59pm on 4 August 2026.
What has the Upper Tribunal suspended?
The order pauses the parts of the scheme that produce money. Firms need not work out redress. They need not pay it. They need not send customers messages about compensation owed. That holds until the Tribunal process ends.
Everything else stands. The FCA says firms must follow every rule that is not suspended, and it has published the list.
The regulator framed the pause as a way to stop firms doing work twice. If the challenges succeed, much of that work would need redoing. The order also gives some consumers an earlier answer. Firms must still tell complainants who are not owed compensation, subject to limited exceptions. They get seven extra weeks beyond the original deadlines to send those messages.
Who is challenging the motor finance redress scheme?
Four parties, under section 404D(1) of the Financial Services and Markets Act 2000. The FCA set the scheme up on 30 March 2026 under sections 404 and 404A of the same Act. Section 404D is the route by which it can be challenged.
The challengers are CA Auto Finance UK Limited, Consumer Voice Limited, Mercedes-Benz Financial Services UK Limited and Volkswagen Financial Services (UK) Limited. Courmacs Legal acts for Consumer Voice.
Most of the industry stayed out. Lloyds, Barclays, Santander and Close Brothers did not join. Some lenders raised concerns about scope and methodology separately.
The Upper Tribunal (Tax and Chancery Chamber) has jurisdiction. It applies broadly the same principles as judicial review.
Why does the 4 August deadline matter?
It is the only chance to be added to the proceedings.
The Tribunal’s directions order of 1 July sets the rule. Anyone seeking interested party status must apply within 28 days of the order appearing on the FCA website. That gives a hard cut-off of 11.59pm on 4 August 2026. The order also sets out the form and content an application must take.
Lenders, brokers, trade bodies and consumer groups therefore have days rather than weeks. Nobody added after the deadline gets to shape the argument.
Lenders no longer have to calculate redress, pay it or write to customers about compensation on the original timetable. The payments the FCA expected in 2026 will not now happen before 2027. Firms must still identify relevant complaints and gather commission data. Anyone wanting a say in the tribunal proceedings has until 4 August to apply.
What must firms still do?
Three things, none of them paused.
Identify relevant complaints and agreements. Gather the data that shows commission arrangements and disclosure practices, including data held by brokers rather than the lender. Respond to complainants who are not owed compensation by the relevant deadlines, subject to the FCA’s limited exceptions.
Implementation deadlines stay live. Firms under scheme two, covering agreements from 1 April 2014, had until 30 June 2026. Firms under scheme one, covering earlier agreements, have until 31 August 2026.
The scheme covers agreements struck between 6 April 2007 and 1 November 2024. The FCA puts its value at £7.5 billion.
When will the challenge be heard?
The Tribunal has fixed two possible windows. The first runs from 14 to 18 December 2026. The second runs from 16 to 26 February 2027. Which one applies depends on whether any party wins an application for further expert evidence or disclosure.
Judgment would follow in the months after. If the scheme survives and no further appeal follows, the FCA expects payments to begin in 2027. If it is quashed in whole or in part, the regulator would have to consult again. That would stretch the timeline further still.
Plan for both. Contingency work sits alongside continued scheme preparation rather than replacing it. That means accounting provisions and early engagement with auditors.
The Legal Brief covered the scrutiny of firms working in this space in its report on the FCA claims management review and the joint motor finance taskforce. Claims-heavy practices holding consumer money also sit inside the reforms covered in the SRA’s client money package.
The FCA has published its statement on the partial suspension, the legal challenge documents and Tribunal directions, and the policy statement behind the scheme, PS26/3.