The FCA has published a further update on the legal challenges to its motor finance compensation scheme, setting out what it expects firms to do now and what consumers should do while the legal process continues.
The key change is that the FCA is now preparing for two tracks at once. It still says an industry-wide scheme is what the FCA considers to be the quickest, fairest and most cost-effective route, and it intends to defend it robustly. At the same time, it is telling lenders to plan for an alternative scenario where there is no scheme, because complaints cannot remain paused indefinitely.
What has changed since the last FCA statement
The FCA says it is still unclear when the case will be heard, and that a hearing is unlikely to take place before October. That creates a longer period of uncertainty for both motorists and lenders, particularly for people who have already been waiting more than two years for an answer.
The regulator also says it is discussing with the Tribunal and the challengers whether some elements of the scheme could be suspended while still allowing preparatory work to continue. The FCA has said it will provide a further update as soon as possible, and it will provide additional advice to firms next week.
What the FCA is telling lenders to do now
The FCA’s message to firms is broadly “keep preparing until you are told otherwise”. It recognises operational strain and acknowledges uncertainty, but it is clear that work done now is likely to be needed under most outcomes.
Before listing the specific actions the FCA highlights, it is worth noting the practical implication. Even if the scheme timetable itself is affected, lenders are still expected to build the capability to identify relevant agreements and to handle large volumes of complaints fairly and efficiently.
The FCA says work that can be done now includes:
- Identifying relevant complaints and agreements.
- Gathering the data needed to identify commission arrangements and disclosure practices, including where information is held by brokers.
- Working with claims companies to resolve instances where consumers are represented by more than one party.
- Cooperating fully and promptly with the Financial Ombudsman Service on any existing complaints that have been referred to it.
The FCA also says lenders should still submit implementation plans by 12 May, but it will not insist on receiving formal attestations by that date. It adds that lenders should speak to their supervisor if they have concerns.
A pragmatic pause on scheme communications
The FCA has also signalled a more pragmatic stance on consumer communications while the Tribunal timetable is unclear. It says it will not require firms to communicate to customers as required by the scheme timetable, and it will keep this under review.
This is an important point for consumers to understand. It suggests that even where firms have been building toward scheme deadlines, the FCA is trying to avoid confusing or premature letters going out while it works out what is feasible and lawful given the legal challenge process.
Complaints inside and outside the scheme
The FCA distinguishes between complaints that would sit within the scheme and complaints that fall outside it.
It says complaints that are entirely outside the scope of the scheme should continue to be progressed in the usual way. Where complaints include both scheme elements and elements unrelated to motor finance commission, the FCA says it will consider whether firms should now progress the unrelated elements. The goal appears to be avoiding unnecessary delays for issues that are not dependent on the outcome of the scheme challenge.
Contingency planning: the FCA’s “no scheme” planning assumption
This is the most significant operational message in the update. The FCA reminds firms that it took an unusual step by pausing complaints from 11 January 2024, but complaints cannot be paused indefinitely. It is therefore directing everyone to focus on contingency plans and prepare for the alternative scenario of no scheme.
The FCA says it has not made decisions on what it would do under each scenario. However, it sets out indicative assumptions to help lenders plan. In simple terms, it is now supervising lenders against a central planning assumption that if the scheme or parts of it were quashed, there would be no scheme and the industry would need to move to a complaint-led and supervisory approach.
The initial assumptions the FCA gives include:
- Consumers will continue to be encouraged to complain directly to their lender.
- Lenders should prepare, on a precautionary basis, for a Tribunal decision by mid-November 2026.
- There would be no further extension of the complaints pause, and lenders should be ready to deal with complaints within the usual statutory timeframes from that point.
- There would not immediately be further FCA rules or guidance on redress methodology, and firms would need to draw on relevant court judgments and Tribunal reasoning.
- The FCA would work closely with the Financial Ombudsman Service to support an orderly market and smooth consumer experience.
- The FCA would consider how to use supervisory and enforcement powers to require firms to proactively contact affected customers who have not complained.
- Lenders should ensure appropriate provisions and engage with auditors as part of preparations.
This tells us two things. First, the FCA is still aiming for a scheme, but it is now explicitly preparing for the possibility that the scheme does not proceed as designed. Second, lenders are being told to build the capacity to deliver outcomes through a complaint-led route if needed, which may be more burdensome and costly for firms, and potentially less accessible for consumers who do not complain.
What the FCA says consumers should do now
The FCA recognises that people will be frustrated by delays. It says it remains committed to ensuring consumers receive any compensation owed as promptly as possible.
Its consumer guidance remains consistent: if you have concerns about motor finance commission arrangements, the best step is to complain directly to your lender. The FCA emphasises this is free, and says you do not need to use a law firm or claims management company, which may charge over 30% of any compensation. It also warns consumers not to sign up to multiple claims companies or law firms because they may be charged multiple fees.
The FCA also sets out where to complain if you are unhappy with a representative. If you used a claims management company or law firm and you are unhappy with how they handled your case or the fees charged, you should complain to the firm first. If you are dissatisfied with the response, you may be able to escalate to the Claims Management Ombudsman or the Legal Ombudsman, depending on which regulator oversees the firm.
Craig Gedey comment
Craig Gedey, press contact for PCP ClaimBack, said:
“Today’s FCA update is a clear signal that the regulator is trying to keep momentum while the legal challenge process plays out. It is still backing an industry-wide scheme as the best route, but it is also telling firms to prepare for a world where complaints restart without a scheme. For consumers, the practical takeaway is unchanged: if you believe commission was not properly explained, complain to your lender so your position is on record. If you want support, we can manage the paperwork, and help guide you through escalation processes where appropriate, so you are not left trying to navigate complex rules and changing timelines on your own.”
Where PCP ClaimBack a Claims Management Company fits in
The FCA is clear that you do not need a claims management company to complain, and many people will choose to do it themselves. PCP ClaimBack is there for those who want support, particularly where paperwork is missing, there are multiple agreements, you are unsure who the lender was, or you want help understanding a firm’s response against the latest FCA position as it evolves.
Our role is to help review your claim, handle the paperwork, and assist on escalation where appropriate. A success fee between 18% and 36% (including VAT) will be charged if your claim is successful. No fee is charged if your claim is unsuccessful. If you cancel your claim after the 14-day cooling-off period, you may still be charged a fee to cover our reasonable costs incurred in relation to Our Services at the rate of £75 per hour (including VAT). Full terms and conditions are provided before you instruct us.
Further information is available in our internal resources section, including guidance on car finance claims, bmw pcp claims, close brothers pcp claim, black horse finance claim, and Barclays pcp claims.
This article is for general information only and does not constitute legal or financial advice.
