Motor finance legal challenge to be heard in February 2027

The scheme, currently partially suspended, faces opposition from three lenders—Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance—and Consumer Voice. Despite the suspension, lenders must continue to comply with the scheme rules that remain in force and progress complaints. Firms are advised to prepare for the possibility that the scheme is quashed, which would eliminate both the compensation scheme and the complaint handling pause, requiring operational and financial readiness.

For compliance teams, this means maintaining current obligations, including sending required letters to consumers not owed compensation. It is crucial to plan for two scenarios: the scheme being upheld or struck down. In either case, robust complaint handling and clear communication will be essential.

The FCA asserts the scheme is the quickest and fairest route to compensation and will defend it vigorously. Lenders should assess their financial exposure and operational capacity to handle a potential surge in complaints if the pause is lifted. Proactive preparation can mitigate risks, ensure regulatory compliance, and protect reputational standing.

Firms should also consider the competitive advantage of efficient complaint resolution and transparent customer engagement.