Why are FCA Car Finance Compensation Payouts Delayed Until 2027?

What the FCA redress scheme was intended to achieve

The Financial Conduct Authority introduced a redress scheme to compensate motorists who were sold car‑finance agreements with hidden, or “discretionary”, commission arrangements. The FCA estimates that around 12.1 million finance agreements are eligible, with an average payout of £829 per agreement.

Development of the scheme has already cost the regulator more than £20 million, and the total exposure to the automotive finance industry is projected at £9.1 billion.

Why payments are now expected no earlier than 2027

Deputy chief executive Sarah Pritchard told the Treasury Select Committee that ongoing legal challenges will push any payouts back by several years. She said, “If the scheme goes ahead, the delay will result in payments not before 2027.” The delay reflects both the time needed to resolve the court cases and the additional costs that will be incurred.

Legal battles that are driving the postponement

Four separate actions have been filed against the FCA’s redress plan. The financial‑services arms of Volkswagen and Mercedes‑Benz, the car‑finance division of French bank Crédit Agricole, and the consumer group Consumer Voice are seeking to have the scheme quashed on the basis that the rules are unlawful.

Notably, no UK‑based bank has joined the challenge, but the combined pressure from these high‑profile firms has forced the regulator to reassess the timetable.

Potential cost implications if the scheme is overturned

FCA chief executive Nikhil Rathi warned that a court ruling could “strike down the scheme in whole or part”. In that scenario the FCA would need to devise an alternative route for compensation, most likely a complaints‑led process. Rathi estimates that such an approach could add around £6 billion to lenders’ costs and take an additional three years to resolve individual claims.

What this means for consumers

Motorists who were mis‑sold finance agreements should expect a further wait before receiving any compensation. Even if the redress scheme eventually proceeds, the earliest payments are now projected for 2027, meaning a gap of several years from the originally planned 2024‑25 start.

Consumers can still lodge individual complaints with their lenders, but the FCA’s preferred route – a bulk payout based on the average £829 figure – remains uncertain while the legal challenges play out.

Further reading on the FCA car‑finance redress

• FCA launches investigation into claims management company over motor finance crisis
• FCA hits out at lenders over redress challenge that will create ‘fresh uncertainty for millions’
• Mercedes‑Benz and two other firms to challenge FCA over motor finance redress scheme
• £7.5bn compensation scheme for motor finance scandal revealed by FCA
• Close Brothers Motor Finance estimates 720,000 of its loans will qualify for redress scheme
• FCA bans fake Martin Lewis motor finance ads after ‘unauthorised clips’ used

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