Car finance redress payments slip into 2027 as the Upper Tribunal fixes a February hearing
FCA car finance redress for about 12 million loans will pay nothing before 2027, with legal challenges due at the Upper Tribunal in February. Average payouts of £829 now wait on that hearing, and lenders facing a £9.1bn bill have to plan for a delay with no fixed end.
The Board Room · Leadership desk
Key figures: the FCA decision applies to about 12 million car loans; the FCA expects average payouts of £829 per mis-sold agreement; the total cost including administrative costs could hit £9.1bn.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Car loans the FCA decision applies to, about | 12 million loans | 3 | |
| Expected average payout | £829 per agreement | 4 | |
| Possible total cost | £9.1bn incl. admin | 5 |
What happened
- Volkswagen Financial Services, Mercedes-Benz Financial Services and Credit Agricole Auto Finance are challenging the scheme, as is the advocacy group Consumer Voice.
- The FCA published its finalised proposals at the end of March, after cutting the number of qualifying agreements to 12.1m from 14.2m.
- Volkswagen Financial Services set aside £725m for the scheme in newly filed accounts, according to City AM.
- Complainants who are owed nothing should be told by 18 November if they complained by 30 June, and by 18 January 2027 if they complained by 31 August.
- Complaints have already been made about four million finance agreements, and those borrowers do not need to do anything.
Why it matters
- What it costs cost Provisions stay on lenders' books through at least the 26 February 2027 hearing, and a lender that releases early would have to restore the charge if the tribunal sides with the FCA.
- Who has to decide decision Each lender must choose how to provision when the criteria are under challenge; VWFS booked to the FCA's criteria while saying they lack clarity for captive finance.
- Who's exposed exposure The FCA's modelling is itself contested: lenders say the data and code were withheld from them and from the tribunal, so the hearing tests the method as well as the result.
Next story · Leadership · 2d ago
BitMEX's operator faces a £20m High Court claim that unapproved UK derivatives contracts are voidConfirmed6 publishers
The one fixed timetable in the BBC's account is for borrowers who are owed nothing [9]. The timing of lenders' letters explaining whether and how much a borrower is owed is uncertain because of the legal challenge, according to the BBC [10]. Millions of drivers had been in line to receive compensation this year [14]. The Upper Tribunal sits from 16 to 26 February 2027 [1]. Neither account says when it will rule, and neither puts any of the £9.1bn on dealers; City AM says lenders were put on the hook for it [6].
The challenges come from opposite sides. According to City AM, captive lenders argue that the scheme forces an unlawful blanket assumption that most customers lost money when commissions were not clearly disclosed [19]. Consumer Voice said the scheme left "too many people short-changed" [8]. The lenders also accuse the FCA of using complex economic modelling to justify the scheme, and of refusing to share the data and code with affected firms or the tribunal [20]. In our view a lender cannot treat the FCA's totals as a floor or a ceiling until the tribunal rules.
The published figures also do not multiply out. A total of 12.1m covered agreements [6] at £829 each [4] comes to about £10.03bn [22]. That is roughly £0.93bn above the £9.1bn total [23], and the total already includes administrative costs [5]. The £829 average therefore cannot apply to every covered agreement. The FCA puts it per mis-sold agreement [4], and the BBC says what each borrower receives depends on the degree of harm [15].
Volkswagen Financial Services shows the choice a lender faces. Its £725m provision [16] is about 8% of the £9.1bn total [18]. It said the provision rested on the criteria in the FCA's policy statement [17]. It also said those rules "do not reflect the specific elements of, or provide sufficient clarity on, how the scheme applies to a captive finance provider" [21].
That is the trade-off. A lender that releases a provision before the tribunal rules is betting on the challengers' case, and a loss at the February 2027 hearing [1] would put the charge back into a later period. A lender that holds carries the charge through the hearing. We think holding is the defensible position, and nothing in the record moves a provision this week.
The FCA's advice to borrowers is to contact their car loan provider directly instead of using a claims management company, and people who complain before the scheme starts are likely to be paid faster [13]. Nikhil Rathi, the FCA's chief executive, told the BBC's Today programme there are "many law firms out there who would like to get 30% of any compensation" [12]. He stressed that the scheme was "free to use" for consumers [12].
What to watch
- Whether the Upper Tribunal gives a ruling date when the hearing closes on 26 February 2027.
- Whether the 18 November and 18 January 2027 notices to borrowers owed nothing go out on schedule, and whether lenders then say when letters to borrowers owed money will follow.
- Whether other lenders' accounts book provisions on the FCA criteria as Volkswagen Financial Services did, or hold back.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence72
- Adoption
- Not scored
- Hype gap+8
- Incentives60
- Confidence70
Perspective Coverage
3 publishers- Builder
- Builder 4%
- Operator
- Operator 53%
- Investor
- Investor 43%
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The Upper Tribunal (Tax and Chancery Chamber) is set to hear the legal challenges to the FCA's motor finance redress scheme between 16 and 26 February 2027.
- [2]
The FCA has confirmed that no car finance compensation will be paid before 2027 as a result of legal challenges to the scheme.
- [3]
The FCA decision applies to about 12 million car loans, just over 40% of the total number during the period April 2007 to November 2024.
- [4]
The FCA expects average payouts of £829 per mis-sold agreement.
- [5]
The total cost of the compensation, including administrative costs, could hit £9.1bn.
- [6]
The FCA published finalised proposals at the end of March, in which lenders were put on the hook for £9.1bn, lower than previously expected, after the number of qualifying agreements was reduced to 12.1m from 14.2m.
- [7]
The FCA faces challenges from three lenders, Volkswagen Financial Services, Mercedes-Benz Financial Services and Credit Agricole Auto Finance, as well as the advocacy group Consumer Voice, at the Upper Tribunal.
- [8]
Consumer Voice said the scheme left "too many people short-changed".
- [9]
People who complained by 30 June and are not owed compensation should be told by 18 November; those who complained by 31 August will be told if they are not owed compensation by 18 January 2027.
- [10]
Lenders will respond to claims explaining whether and how much compensation is owed, but the timing of those letters is now uncertain owing to the legal challenge.
- [11]
Complaints have already been made about four million finance agreements, and those people do not need to do anything.
- [12]
FCA chief executive Nikhil Rathi told the BBC's Today programme there are "many law firms out there who would like to get 30% of any compensation", stressing that the regulator's scheme was "free to use" for consumers.
- [13]
The regulator urged anyone who has not yet complained to contact their car loan provider directly rather than using a third-party claims management company, and those who complain before the scheme gets up and running are likely to receive compensation faster.
- [14]
Millions of drivers were in line to receive compensation this year.
- [15]
How much individual consumers receive will depend on the degree of harm suffered.
- [16]
Volkswagen Financial Services UK set aside £725m for expected expenses under the car finance redress scheme, according to newly filed accounts.
- [17]
VWFS said its provision was based on the criteria set out in the FCA's policy statement.
- [18]
VWFS's £725m provision is about 8% of the £9.1bn total.
- [19]
Captive lenders, the financial arms of manufacturers, have argued that the scheme forces an unlawful blanket assumption that most customers suffered a financial loss if their commissions were not clearly disclosed.
- [20]
Lenders have accused the FCA of using complex economic modelling to justify the scheme and have criticised it for refusing to share the data and code with affected firms or the Upper Tribunal.
- [21]
VWFS said the FCA rules "do not reflect the specific elements of, or provide sufficient clarity on, how the scheme applies to a captive finance provider".
- [22]
12.1m covered agreements at an average £829 each comes to about £10.03bn.
- [23]
The £10.03bn product is roughly £0.93bn above the £9.1bn total cost, which already includes administrative costs.
Sources
3 independent publishers whose own reporting we read for this story.
- bbc.co.ukCar finance compensation payments delayed until next year
1 article · October 13, 2026
- cityam.comMotor finance legal battle set for February 2027
1 article · October 13, 2026
- crowdfundinsider.comMotor finance legal challenge to be heard in February 2027
1 article · October 13, 2026
Topics and entities
Topics
- Consumer redress litigation
- UK Financial Regulation
- Car finance redress
Entities
- Mercedes-Benz Financial Services
- Financial Conduct Authority
- Volkswagen Financial Services
- Crédit Agricole Auto Finance
- Finance and Leasing Association
- Nikhil Rathi
- Upper Tribunal (Tax and Chancery Chamber)