Car finance redress payments slip into 2027 as the Upper Tribunal fixes a February hearing

The one fixed timetable in the BBC's account is for borrowers who are owed nothing ^[13]. The timing of lenders' letters explaining whether and how much a borrower is owed is uncertain because of the legal challenge, according to the BBC ^[14]. Millions of drivers had been in line to receive compensation this year ^[8]. The Upper Tribunal sits from 16 to 26 February 2027 ^[2]. Neither account says when it will rule, and neither puts any of the £9.1bn on dealers; City AM says lenders were put on the hook for it ^[5].

The challenges come from opposite sides. According to City AM, captive lenders argue that the scheme forces an unlawful blanket assumption that most customers lost money when commissions were not clearly disclosed ^[12]. Consumer Voice said the scheme left "too many people short-changed" ^[7]. The lenders also accuse the FCA of using complex economic modelling to justify the scheme, and of refusing to share the data and code with affected firms or the tribunal ^[16]. In our view a lender cannot treat the FCA's totals as a floor or a ceiling until the tribunal rules.

The published figures also do not multiply out. A total of 12.1m covered agreements ^[5] at £829 each ^[3] comes to about £10.03bn ^[22]. That is roughly £0.93bn above the £9.1bn total ^[23], and the total already includes administrative costs ^[4]. The £829 average therefore cannot apply to every covered agreement. The FCA puts it per mis-sold agreement ^[3], and the BBC says what each borrower receives depends on the degree of harm ^[19].

Volkswagen Financial Services shows the choice a lender faces. Its £725m provision ^[10] is about 8% of the £9.1bn total ^[21]. It said the provision rested on the criteria in the FCA's policy statement ^[11]. It also said those rules "do not reflect the specific elements of, or provide sufficient clarity on, how the scheme applies to a captive finance provider" ^[20].

That is the trade-off. A lender that releases a provision before the tribunal rules is betting on the challengers' case, and a loss at the February 2027 hearing ^[2] would put the charge back into a later period. A lender that holds carries the charge through the hearing. We think holding is the defensible position, and nothing in the record moves a provision this week.

The FCA's advice to borrowers is to contact their car loan provider directly instead of using a claims management company, and people who complain before the scheme starts are likely to be paid faster ^[18]. Nikhil Rathi, the FCA's chief executive, told the BBC's Today programme there are "many law firms out there who would like to get 30% of any compensation" ^[17]. He stressed that the scheme was "free to use" for consumers ^[17].