Experts have called for urgent action to be taken to ensure millions of drivers are not left in limbo after the compensation scheme for the car finance scandal was delayed.
The Financial Conduct Authority announced yesterday that it would partially suspend the motor finance redress scheme as it faces several legal challenges.
It announced that the Upper Tribunal has made an order suspending parts of the scheme as the FCA waits to hear legal challenges to the compensation scheme.
This is set to take place between December 14 and 18, 2026, or from February 16 to 26, 2027, although this will depend on whether those involved in the case apply for further expert opinion.
The financial regulator outlined that if it seeks views on a revised scheme, they could face further legal challenges, and compensation could be delayed until "2028 or beyond".
Legal challenges are being brought forward by Consumer Voice, represented by Courmacs Legal, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance.
Alex Neill, co-founder of Consumer Voice, said the firm was ready to present its arguments to show why the current redress scheme "fails to deliver fair, adequate or lawful redress".
She continued, saying: "Consumer Voice has always supported an industry-wide redress scheme.
Experts have warned that drivers could face delays when receiving compensation from the car finance scandal
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"We are pleased that the Upper Tribunal has agreed with what we said when we announced our challenge in April - that lenders should proceed with the 'back office' process of identifying impacted motorists."
More than 12 million agreements are eligible for compensation, with the FCA estimating a total cost of £9.1billion, while the average payout will be £829 per agreement.
When designing the scheme, the FCA said it wanted to balance a fair compensation structure for impacted drivers without harming the car finance sector.
Robert Whitehead, chairman of Barings Law, said the timing of the scheme was "remarkable", given a Court of Appeal decision which ruled that consumers could pursue mass motor finance claims through the courts.
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Nikhil Rathi, CEO of the FCA, confirmed that 12.1 million agreements could be included in the final redress scheme | PARLIAMENT TVHe emphasised how Barings Law had been fighting these cases for years by taking on financial institutions to secure redress for drivers, rather than "delay and compromise".
Mr Whitehead added: "Consumers are once again being told to wait, potentially until 2027 or beyond, while regulatory processes remain stalled or challenged.
"This week has made one thing clear: without law firms willing to pursue claims through the courts, millions of motorists would still be waiting for justice that the regulatory process has not delivered."
Under measures announced in March, the FCA suggested that firms could start paying compensation as soon as possible.
The FCA originally planned for the majority of drivers to receive their compensation by the end of 2027 and the beginning of 2028 | FCAHowever, CEO Nikhil Rathi acknowledged that this would be unlikely, given that lenders and banks would want to fully digest the redress scheme before making a decision.
The FCA suggested that the vast majority of car finance claims would be settled by January 2028, although this timeline has now been thrown into jeopardy.
Consumer Voice's Alex Neil concluded: "The FCA needs to engage with the legal process with the urgency that's required, given consumers have been waiting for the regulator to act since 2019, and the three lender challengers should stop dragging their feet.
"The tribunal has now set the timetable, so there are no more credible excuses for delay."