UK FCA motor finance redress scheme partially suspended

The UK Financial Conduct Authority (FCA) has published a statement announcing that the Upper Tribunal has made an order suspending parts of its motor finance redress scheme while legal challenges brought by several parties are considered. The order was made on terms agreed between the FCA and the challengers, with the partial suspension enabling firms to continue preparing for the scheme while avoiding duplication of work if the challenges succeed. The Tribunal is scheduled to hear the challenges on 14-18 December or 16-26 February 2027. Firms are still expected to comply with all rules that are not suspended and a list of retained scheme rules has been published.

Under the suspension, firms are currently not required to calculate, communicate or pay compensation under the scheme timetable; however, they must continue preparatory work, including identifying relevant complaints and gathering data. Firms must also notify complainants who are not entitled to compensation under the scheme within the scheme deadlines, subject to limited exceptions. If a firm requires more time to notify consumers, the FCA will not treat it as non-compliant or take enforcement action as long as consumers are notified within seven weeks of the relevant scheme deadline.

Firms are expected to update complainants to explain when the legal challenge will be heard, what the partial suspension means, and the likely impact on the timetable for dealing with complaints and paying any compensation owed.

The FCA reiterates that it considers the scheme the quickest and fairest route to consumer redress and intends to defend it. If the scheme is ultimately upheld, compensation payments are expected to begin in 2027. If it is overturned, the FCA may instead require firms to resolve complaints through the standard complaints process, which could result in greater involvement from the UK Financial Ombudsman Service. The FCA expects firms to plan for the event of no scheme and to be operationally and financially ready for a complaint-led and supervisory approach to resolve historical liabilities, in line with the default statutory timelines.

In the interim, while the legal challenges are ongoing, the FCA will continue to take a pragmatic approach as previously set out in its May statement.

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