Upper Tribunal suspends parts of FCA motor finance compensation scheme
Motor finance lenders must not calculate or pay scheme redress or send compensation-timetable communications until the Upper Tribunal process concludes
Change
On 2 July 2026 the Upper Tribunal ordered a partial suspension of the Financial Conduct Authority (FCA) motor finance compensation scheme, pausing firms' obligation to calculate or pay redress and to send compensation-timetable communications under the scheme until the Tribunal process concludes, while leaving all other scheme rules in force.
Why it matters
Firms remain bound by every rule the Tribunal did not suspend, including identifying relevant complaints, gathering commission and disclosure data (including from brokers), responding to complainants who are not owed compensation by the scheme deadlines, and cooperating with the Financial Ombudsman Service. Brokers must provide lenders with requested documents, or confirm they do not hold them, within one month of a request. The FCA supervises lenders against a central assumption that the scheme could be quashed entirely, and expects appropriate capital, liquidity and provisions to be held in UK-regulated entities; it will take action, including business restrictions, where firms lack the required financial resources.
Implications
- — Lender complaint-handling teams must not calculate or pay scheme redress or send compensation-owed communications under the scheme timetable until the Upper Tribunal process concludes — performing those actions now risks repeated work if the scheme is quashed, while all unsuspended scheme rules continue to bind.
- — Lenders' finance and risk teams in UK-regulated entities must hold appropriate capital, liquidity and provisions and engage auditors against the contingency that the scheme is quashed and liabilities revert to default statutory timelines — inadequate financial resources risk FCA supervisory action, including business restrictions.
- — Broker compliance teams must provide lenders with requested commission and disclosure documents, or confirm they do not hold them, within one month of each request — missing that window breaches the unsuspended rules.
- — Lender complaint-handling teams must still notify complainants who are not owed scheme compensation by the applicable scheme deadlines, subject to the out-of-time and captive-lender exceptions — the FCA treats notification within 7 weeks of the deadline as compliant, but silence beyond that is not.
Who is affected
- — Lender complaint-handling teams
- — Lenders' finance and risk teams in UK-regulated entities
- — Broker compliance teams
What to watch
- — 14–18 December 2026 (or 16–26 February 2027): Upper Tribunal hears the legal challenges to the scheme; the partial suspension remains in force until the process concludes.
- — 18 November 2026: deadline for lenders to notify complainants not owed compensation where the agreement began on or after 1 April 2014 and the complaint was received by 30 June 2026.
- — 18 January 2027: deadline for lenders to notify complainants not owed compensation where the agreement began before 1 April 2014 and the complaint was received by 31 August 2026.