A February date has been set for lenders and claims lawyers to go up against the Financial Conduct Authority over its motor finance redress scheme.
The Upper Tribunal has revealed it will hear the twin legal challenges between 16 and 26 February. The scheme remains partially suspended pending the legal action, with motorists forced to wait to secure compensation for mis-sold finance and hidden commissions.
The FCA has insisted that the scheme represents the best deal for lenders and consumers, but it has come under attack from all sides. Three lenders are involved in a joint challenge – Volkswagen Financial Services (VWFS), Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – along with lobby group Consumer Voice, represented by claimant firm Courmacs Legal.
‘Our scheme is the quickest, fairest and most efficient way to compensate consumers and we will defend it robustly,’ said the regulator.
The FCA appeared to make a veiled threat to lenders who want the terms of the scheme amended, saying this could have the effect of leaving them exposed to law firms.
It added: ‘[Lenders 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.’
The FCA continues to encourage people not to use a law firm or claims management, saying they may charge consumers up to 36% of any compensation.
Lawyers said that pushing the hearing to February next year means a ruling is unlikely before the spring, with payouts potentially slipping to 2028.
Kevin Durkin, solicitor-advocate and director of HD Law, the firm that secured a claimant victory when the motor finance issue came before the Supreme Court in 2025, said consumers have not been put off signing up despite the FCA action.
‘Drivers are quite rightly fed up with waiting. We’ve seen a 311% rise in claims compared with the same time last year, reflecting the growing appetite among consumers to pursue the compensation they believe they are owed,’ said Durkin. ‘We expect demand to continue for as long as the scheme remains tied up in judicial review proceedings.
‘Based on our experience successfully representing consumers through the court system, we believe that more than 45% of claims will still need to be pursued through litigation, even if the FCA scheme comes into force, whenever that may be.’
Consumer Voice co-founder Alex Neill said the group wants to get on with the case and urged against any further delay. She added: ‘We remain resolute and confident in our challenge, the only one made on behalf of millions of consumers who are being short-changed by the redress scheme.’
A spokesperson for VWFS said it welcomes the Upper Tribunal’s decisions requiring the FCA to disclose the data and analysis underpinning its proposed redress scheme and permitting the use of expert evidence in these proceedings.
They added: ‘We have consistently said that we support redress where customers have been genuinely disadvantaged. However, it is important that any scheme is fair, properly targeted, and lawful. We do not believe the FCA’s proposed scheme meets those principles, which is why we have brought this appeal.
‘The tribunal’s decisions will ensure that it has access to the evidence necessary to properly assess the FCA’s proposals.’