The delay means motorists who were expecting payouts worth an average of £829 could now be waiting until 2027 or beyond, after a tribunal agreed to hear legal challenges against the compensation plans.
The Financial Conduct Authority (FCA) had proposed an industry-wide scheme covering around 12.1 million car finance agreements, with lenders paying compensation automatically to eligible customers.
However, the UK’s Upper Tribunal has now suspended key parts of the scheme while it considers challenges brought by finance firms linked to Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole, alongside consumer campaign group Consumer Voice.
CAR FINANCE MISSELLING (BAD) NEWS – and help on what to do.
Things have been delayed further. The Court has just said it’ll only hear the legal challenges to the @TheFCA scheme in Dec 26 or Feb 27 – far later than had been thought.
So even if the challenges fail, payouts…
— Martin Lewis (@MartinSLewis) July 2, 2026
As a result, lenders no longer have to calculate compensation, make payments or tell customers how much they are due until the legal process has finished.
The tribunal is expected to hear the case in December 2026 or February 2027, with a judgment likely months later.
If the FCA ultimately wins – and there are no further appeals – compensation payments are now unlikely to begin until sometime in 2027.
What happens if you’ve already complained?
Although payouts are on hold, lenders must continue processing complaints as far as possible.
That means firms can still tell customers if they are not entitled to compensation, but anyone who is eligible for a payout will have to wait until the legal battle is resolved before any compensation can be calculated or paid.
Companies are also expected to write to customers explaining why claims have been delayed.
What if the FCA loses?
The regulator warned the consequences could be significant.
Without a single industry-wide compensation scheme, it estimates as many as 19 million individual complaints would need to be handled separately.
The FCA believes that would take around three years longer and cost lenders an additional £6 billion.
Martin Lewis: Don’t stop your complaint
Consumer finance expert Martin Lewis urged motorists not to abandon their claims despite the latest setback.
Writing on social media, he said: “Things have been delayed further.”
He added: “The Court has just said it’ll only hear the legal challenges to the FCA scheme in Dec 26 or Feb 27 – far later than had been thought.”
Lewis warned that even if the challenges fail, “payouts likely wouldn’t start until mid-2027 at the earliest. And even then there could be appeals.”
For people who have already complained, his advice was simple: “Sit tight.”
He said customers who do not receive a rejection should not expect any further update for now, adding: “I know many find that frustrating.”
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However, he also encouraged anyone who has not yet submitted a complaint to do so.
Lewis said: “It’s still worth getting one in now, as you will eventually get paid out quicker if you’re due. Plus there will be less ‘not finding your info’ risk.”
The latest delay is another frustrating twist in what has become one of the UK’s biggest consumer finance scandals, with millions of drivers still waiting to discover whether they are owed hundreds of pounds in compensation.