A compensation scheme for people who took out car finance has hit a legal pause, and some customers are already receiving letters saying they are owed nothing. The scheme has not been cancelled, but parts of it are suspended while a court challenge runs its course, so the timetable that many people were counting on has slipped.
In this article, we will discuss where the scheme stands, what the new response dates mean, how settlement offers work, and the practical steps you can take now to protect your position.
Where the Scheme Stands After the Legal Challenge
The Financial Conduct Authority (FCA) says on its consumer page, updated on 3 November 2026, that the car finance compensation scheme has been challenged in court and that parts of it are suspended. The challenge is due to be heard between 16 February and 3 March 2027, and a judgment is expected in the months that follow. The page records a change on 26 October 2026 that extended the hearing dates. Until the court rules, lenders do not currently have to calculate or pay compensation under the scheme.
Many households have been waiting a long time for this money, and a further delay is frustrating, especially for people who planned to use any payout to clear a debt or cover a repair. The practical lesson is that the delay changes when money may arrive, not whether you can put your complaint in place. Nothing in the FCA’s guidance suggests that holding back from complaining improves your position, and it explicitly tells people to complain now.
Parts on Hold
Suspension does not mean the whole scheme has vanished. The FCA’s wording is that parts of it are suspended, and its guidance on the letters now going out refers to the parts of the scheme still in force. In practical terms, the duty on lenders to work out and pay redress is currently paused, while other elements continue. For the exact split, the FCA’s consumer page is the place to look, because it is updated as the case moves and this article cannot substitute for it.
Hearing Timetable
Dates have already moved once. A July article from thinkmoney said a hearing was then set for December 2026 or February 2027. The FCA’s page now gives 16 February to 3 March 2027, after the 26 October change. Treat any date as provisional, since court listings can shift again, and check the FCA page before relying on one. A judgment is expected in the months after the hearing, which is a range and not a date.
Outcome and Payments
The FCA says that if the scheme is upheld and the judgment is not appealed, it expects payments to start in 2027. Two conditions sit inside that sentence. Either side could seek to appeal, and an appeal would add time, though no estimate of how long has been given. thinkmoney said in July that if the scheme were scrapped, an alternative could push payments to 2028 or later. That is an older, single-source view and not an FCA forecast, so read it as a warning about uncertainty rather than a prediction.
Challengers Named in the Case
According to thinkmoney, the challengers are Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. It reported that the Upper Tribunal agreed to hear the challenges and partially suspended the scheme. The FCA’s consumer page does not name the Upper Tribunal, so that detail rests on thinkmoney’s report. Bringing a legal challenge is a lawful step open to firms affected by a regulator’s rules, and the court, not commentators, will decide the outcome.
Who Is Covered and How the Compensation Works
The FCA designed the scheme around agreements made over a long stretch of time and a small number of specific problems. Its published figures, set out in the table below, show how large the exercise is, but they are estimates and averages, not promises to any individual.
| Item | What the FCA says |
| Agreements covered | Made from 6 April 2007 to 1 November 2024 |
| Number of agreements | About 12.1 million |
| Estimated total cost | About £7.5bn, if 75% of eligible consumers claim |
| Average payout | Around £830 per agreement |
| Claim deadline | 31 August 2027 for those not contacted by lenders |
| Claims firm or law firm | Using one could mean losing over 30% of any money received |
Three Situations That Can Trigger Compensation
According to the FCA, compensation applies where borrowers were not clearly told about certain arrangements. The first is a discretionary commission arrangement. In general terms, that meant a broker or dealer arranging the finance could influence the interest rate you were charged within a range, and earned more commission when the rate was higher, which is why the FCA cares whether customers were clearly told. The second is very high commission, which the FCA defines as at least 39% of the total cost of credit and 10% of the loan. The third is a tied arrangement, which in general terms is a relationship that tied the dealer or broker to a particular lender. Whether any of these applies to you depends on the paperwork and the lender’s records, not on the type of car you bought.
Clear Disclosure in Practice
The scheme turns on whether you were clearly told, so it helps to think about what clear disclosure looks like. In general terms, a customer should have been able to learn, at the time of signing, that the person arranging the finance would be paid commission, and that the commission could depend on the rate you were charged or on the lender used. Small print in a long document, or a mention that was easy to miss, is not the same as being told plainly. You do not need to prove this at the complaint stage. Your task is to describe what you recall, and the lender’s task is to look at what it held and what it disclosed. If you remember nobody mentioning commission at all, say so.
Averages in Perspective
The £830 average is exactly that, an average per agreement. Your own figure could be lower or higher, and it depends on the details of your agreement and on how the scheme’s calculation is finalised after the court case. The £7.5bn total is the FCA’s estimate on the stated assumption that 75% of eligible consumers claim, so it moves with take-up. Do not budget around either number. Be aware, too, that the figures describe the scheme as a whole: they say nothing about how much any one lender will pay, and they will not tell you whether your own agreement involved any of the arrangements above. Use them to gauge the scale and to keep your expectations realistic.
Not-Owed Letters and the Dates Lenders Must Respond By
One effect of the partial suspension is that some customers will be told they are owed nothing. The FCA says such notices are based on the parts of the scheme still in force. A letter like that can feel like a final answer, but it is worth reading carefully before you decide what it means for you.
Response Windows
The FCA sets different response dates depending on when the agreement began and when the complaint was made.
| Agreement began | Complaint made | Lender should respond by |
| On or after 1 April 2014 | By 30 June 2026 | 18 November 2026 |
| Before 1 April 2014 | By 31 August 2026 | 18 January 2027 |
| Either | Later complaints | Within five months of receipt |
These dates run independently of the court hearing. A lender can respond to a complaint with a not-owed letter now even though the judgment will not arrive until later in 2027, so the letters can arrive before the legal question is settled. A response is therefore a snapshot of where the scheme stands today, and the FCA’s page remains the reference for what happens next.
If your complaint falls into the first row, you could be hearing very soon, and in the second row the wait is a little longer. Keep a note of the date you complained, because it decides which window applies to you.
Reading a Not-Owed Letter
Treat the letter as information, not a verdict you must accept in silence. Note the date it arrived, the lender’s reference number and the reason given. Because these letters rely only on the parts of the scheme still in force, check the FCA’s consumer page for how such a response sits alongside the legal challenge, and ask your lender in writing what it relied on if the letter is unclear. File the letter with your complaint papers. Do not ignore it, and do not delete it: if the position changes after the court case, a clear record of what you were told and when will be useful.
Contact From Lenders
Lenders may write, email or message you through an online account, and some may call. A legitimate lender will already hold your name, address and agreement details, and it will not need your full card number, PIN or online banking passwords to tell you the outcome of a complaint. Update your contact details with every lender you may have used, and check post sent to old addresses. If a letter is addressed to a previous name, do not dismiss it. When in doubt about a message, log in to your account the usual way, or call the number on your agreement, and avoid using any link supplied in the message.
If You Disagree With a Decision
The FCA tells consumers that if they receive a redress determination they disagree with, they should contact the Financial Ombudsman before the deadline stated in the letter. That deadline is the one to protect. Write it in your diary the day the letter arrives, and contact the Ombudsman in good time rather than at the end. The Financial Ombudsman Service is a free, independent body that looks at disputes between consumers and financial firms; it does not charge you to bring a complaint, and you do not need a representative to do so.
Settlement Offers: Accept Now or Wait
Settlement is the point at which the delay turns into a personal decision, so it deserves a calm approach. The FCA says some lenders may make offers before the legal process ends. Barclays Partner Finance has said it will. Whether an offer is available to you depends on your lender, and nobody is obliged to accept one. An offer is a commercial proposal, and you are free to say no, ask for more information or ask for time. You can see why a lender might want to settle early: it ends uncertainty. You can also see why a customer might: money now is attractive after years of waiting.
Weighing Speed Against Certainty
The key trade-off is clear in the FCA’s guidance. If you accept an offer you cannot claim more later and cannot take the matter to the Financial Ombudsman Service. That is a final deal. If you wait for the legal outcome, you may get nothing sooner, and the amount is not guaranteed either, since it depends on the court and then on the scheme’s final calculation. Neither choice is risk-free. As an illustration with invented round numbers, suppose an early offer is £500 and, after the court case, the formal calculation might have produced a higher or a lower sum. You cannot know which in advance, and the offer closes the question either way.
Questions to Put to the Lender
Before accepting anything, ask how the offer was calculated and what period and agreements it covers. If you had more than one finance agreement with the same lender, ask whether the offer settles all of them or only one. Ask how long the offer stays open, and whether it is in full and final settlement of your complaint. Get the answers in writing. Take your time, because a reasonable lender should not pressure you to decide on the phone, and a deadline to reply is a reason to ask questions sooner, not to sign faster.
If an offer is only a fraction of what you expected, or if you disagree with how your agreement was treated, you can decline and keep your complaint open. If you are unsure, free guidance is available from the Financial Ombudsman Service and from free debt and money advice charities, and you can compare the offer with the FCA’s average payout figure, remembering it is only an average.
Waiting as a Choice
Waiting for the legal outcome may suit people who are not short of money, who do not trust a first offer, or who would rather see the formal calculation. Because the FCA expects payments to begin in 2027 only if the scheme is upheld and not appealed, waiting can mean a long period without a firm date. If you wait, keep your complaint live, keep your contact details up to date with the lender and make a diary note to review matters after the hearing in February and March 2027.
Waiting is a choice about the offer, not about the complaint, which should be in place either way. Keep in mind that your lender may also write to you first, and that you should read any such letter carefully before ignoring it as junk. Opening post promptly is a simple habit that avoids missed deadlines.
Complaining Now, Keeping Records and Avoiding Scams
The FCA’s headline message to consumers is to complain to your lender now, calling it “the best thing you can do”. Complaining is free, and you do not need a claims management company. Lenders will not charge you a fee, which is also your main protection against scams.
Finding Your Lender and the Agreement
Start with what you know. Old finance paperwork, emails and the agreement itself often show the lender’s name, the date and a reference number. If you cannot find them, the FCA suggests identifying your lender through its list and checking your bank statements for monthly payments, asking the dealer you bought from, or looking at your credit file, which lists accounts and the firms that hold them. You can often request a copy of the agreement from the lender, and many lenders have an online portal. Collect the agreement dates too, since they determine which response window applies and whether the agreement falls inside the scheme’s period.
A Simple Complaint Outline
You do not need legal language. Write down your full name and address, the name of the lender, the agreement number if you have it, the approximate dates the finance started and ended, and the car. State that you are complaining about commission and the way the finance was arranged, and that you were not clearly told about it. Ask for a written response and for a copy of the agreement and any information the lender holds about commission. Keep a copy of what you send and the date you sent it. Brevity is fine, because the details can follow as the lender asks for them.
Claims Firms, Fees and Scam Messages
The FCA says using a claims firm or law firm could mean losing over 30% of any money received. As an illustration with invented round numbers, if you were paid £1,000, a fee above 30% would take more than £300 of it, for something you can do yourself without charge. There is a larger risk too: scammers send texts, emails and calls about “your car finance claim”, often asking for a fee, a card payment or details to “release” your money.
Your lender will not charge you a fee to process compensation. Never share PINs or passwords, and do not click links in unexpected messages. If a message prompts you, contact your lender through a phone number or website you already trust and check whether it is real.
The Financial Ombudsman’s Role
The Financial Ombudsman Service is the free, independent route for disputes that a lender has not resolved to your satisfaction. In this story the FCA points to it in two places: it says that accepting a settlement offer rules out going there later, and it tells people who disagree with a redress determination to contact it before the deadline in the letter. It is not a place to start instead of complaining to the lender, because the lender normally has the first chance to respond. Contact it only after you have a response or after the lender’s time to respond has passed, and check its current guidance on time limits.
Keeping Your Own File
Keep one folder, paper or digital, with the agreement, your complaint, every reply, every date and a note of phone calls with the name of the person you spoke to. If your lender changes its name, merges or is taken over, the file keeps your position clear. Add screenshots of any online account pages, since portals sometimes change or close. A complete record also helps if you later need to refer a matter to the Financial Ombudsman Service, because it can show the history without argument.
Practical Steps for the Weeks Ahead
This is general information, not legal or financial advice. The FCA, your lender or the Financial Ombudsman Service can look at the facts of your own case. With that said, a sensible order runs as follows.
First, work out whether the scheme could apply to you. Think about whether you took finance on a vehicle between 6 April 2007 and 1 November 2024, and whether the finance was arranged through a dealer or broker. If you are unsure, assume it is worth checking.
Second, make your complaint if you have not already done so. The FCA says to complain to your lender now, and a complaint made today puts you in the queue for a response. Keep the complaint short and factual, since lenders handle many of them and a clear, brief complaint is easier to match to your records. Remember the claim deadline of 31 August 2027 for people who have not been contacted by their lender, and treat it as a hard stop rather than a target.
Third, log your dates. The response dates of 18 November 2026 and 18 January 2027 depend on when the agreement began and when you complained. If a lender misses a date relevant to you, say so in writing, and keep your reminders.
Fourth, handle any letter calmly. If it is a not-owed notice, record it, ask for the reason in writing if it is unclear and check the deadline for contacting the Financial Ombudsman before it passes. If it is an offer, take time, ask the questions above and remember that accepting means you cannot claim more or go to the Ombudsman.
Fifth, keep an eye on the court calendar. The hearing is due between 16 February and 3 March 2027, with judgment expected later, and dates have already moved once. Check the FCA’s consumer page occasionally for updates rather than relying on social media or paid claims adverts.
Finally, think about special cases. If a finance agreement was in joint names, check with the lender how a complaint should be made and who receives any payment. If the agreement is old and your paperwork is gone, say so in the complaint and ask the lender to search its records, since lenders may hold records for only a limited time and what they keep can vary.
If you are acting for someone who cannot manage their affairs, or for a relative who has died, ask the lender what proof of authority it needs. These situations can be slower, which is another reason to begin early. Last, protect yourself from scams. A real request from your lender will not ask for a fee or for your PIN. If in doubt, stop, and call the lender yourself.
Frequently Asked Questions
When Will Car Finance Compensation Payments Start?
The FCA says it expects payments to start in 2027, but only if the scheme is upheld and the judgment is not appealed. The hearing is due between 16 February and 3 March 2027, with judgment expected in the months after. An older thinkmoney report warned of 2028 or later if the scheme were scrapped.
Can I Still Complain to My Lender While the Scheme Is Suspended?
Yes. The FCA says complaining to your lender now is the best thing you can do, and it is free. Lenders do not currently have to calculate or pay compensation, but a complaint on file secures your place.
How Much Compensation Could I Get?
The FCA’s average payout is around £830 per agreement, but that is an average and not an entitlement. Your own amount would depend on your agreement and on how the scheme is finalised after the court case.
Should I Use a Claims Management Company?
The FCA says you do not need one, and that using a claims firm or law firm could mean losing over 30% of any money received. You can complain to your lender directly at no cost. Be wary of anyone who asks for an upfront fee.
Is There a Deadline to Claim?
The FCA gives 31 August 2027 as the claim deadline for people who have not been contacted by their lender. Separate response dates apply to lenders dealing with complaints already made. Check the FCA’s consumer page for any changes.
Does a Not-Owed Letter End My Claim?
The FCA says such letters are based on the parts of the scheme still in force. Read the reasons, reply in writing if you disagree, and if you receive a redress determination you disagree with, contact the Financial Ombudsman before the deadline in the letter.
