Waiting for Car Finance Compensation? Here’s What the February Hearing Means
Find out what the February 2027 legal hearing means for the FCA's car finance redress scheme and when claimants could be paid.
There’s now a date to circle if you’re following the car finance compensation scheme. The Upper Tribunal will hear legal challenges from 16 February to 3 March 2027, with a judgment expected in the months that follow.
After weeks of back and forth, the big day now has a date. Find out what this means for millions of drivers waiting for a decision on whether – and when – they will receive compensation.
Why is the scheme being challenged?
There are multiple answers to this question because four organisations have taken the Financial Conduct Authority (FCA) to court. They can be divided into two groups.
The first comprises Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. These lenders question aspects of the FCA’s legal approach and how the programme calculates losses and compensation. Their arguments also concern older agreements, time limits, and the scheme’s financial impact on them.
Here, “older agreements” refers to motor contracts signed before April 2014. Some lenders argue that the FCA lacked the authority to include them in the scheme, since consumer credit regulation then fell to another body, the Office of Fair Trading (OFT).
The discussion also involves the formula used to calculate the amount each driver should receive. As data on older contracts may be limited, the FCA created a standardised method to estimate how much less interest customers would have paid on their finance agreements without an inflated interest rate.
The method reduces the annual interest rate by 17% for deals agreed from April 2014, and by 21% for earlier contracts. For example, a rate of 10% a year falls to 8.3% in the first group and 7.9% in the second.
The lender recalculates the cost of the finance using this adjusted rate; the difference from the original amount is used to estimate the loss.
However, lenders dispute whether the 17% and 21% adjustments accurately estimate losses across different types of agreements and periods. The FCA chose the higher percentage for older contracts because it considered that commission practices at the time may have caused greater harm.
The other side of the argument
There is another group involved, consisting of just one association: Consumer Voice, which says it defends drivers’ interests. The entity argues the scheme will result in compensation that is too low. It estimates that lenders could retain at least £4.6 billion under the scheme compared with a more consumer-sided repayment approach.
What happens next?
That’s what everyone wants to know. Depending on what is decided, the scheme may proceed, parts of it could be quashed, or the FCA might have to reconsider elements of its rules.
If the scheme or parts of it are invalidated, lenders may need to handle complaints through the usual process and statutory timescales. The FCA has told firms to prepare for that possibility while moving individual cases forward where they can.
What can drivers do while they wait?
The hearing will take time. The bad news for the drivers is that, until the legal process ends, lenders do not have to calculate or pay compensation under the scheme. However, there are a small number of agreements not covered by the scheme that may be settled ahead of this.
The good news is that consumers still have time to prepare. If you’ve already complained, keep your case reference number and any replies from your lender.
If you’re yet to complain, start now. Our eligibility checker can help you see whether your agreement may fall within the scheme and what to do next.
Checking now gives you time to understand your options while the tribunal considers the scheme’s future.
