The Financial Conduct Authority (FCA) will lift the pause on handling most motor finance complaints on May 31, 2026, setting a timetable for the next phase of its remediation plans for the sector.
The regulator said the window allows it to finalise and begin implementing any compensation scheme, while giving firms time to prepare for a high volume of cases.
The pause was introduced in January 2024 for certain complaints linked to commission arrangements between motor finance lenders and brokers. The FCA said the step was designed to avoid “disorderly, inconsistent and inefficient outcomes” for consumers and knock-on effects on firms and markets while it assessed whether commission disclosure had been adequate.
The watchdog now has legal clarity from the Supreme Court and High Court and is consulting on a compensation scheme for customers who were treated unfairly. It said complaints “cannot be paused indefinitely,” noting that some consumers have been waiting almost two years for an answer.
According to the consultation, the proposed scheme is intended to have a broad scope so that relatively few complaints fall outside it. Complaints not covered by the scheme “should not have to wait longer than necessary” and will continue to be handled under existing complaint-handling rules.
The FCA’s approach is unfolding against a wider debate over the UK’s redress framework, particularly in motor finance. A House of Lords committee has raised concerns that large Financial Ombudsman Service (FOS) awards in motor finance cases could make overseas firms view the UK as a more uncertain regulatory environment and has questioned whether the ombudsman is drifting into a “quasi-regulator” role on complex, high-value disputes.
The FCA’s decision to end the complaints pause is much earlier than the July 31, 2026, date originally proposed. The regulator said that this reflects its aim of ensuring “fair and timely outcomes” while still allowing firms time to organise their response to both scheme and non-scheme complaints.
Firms will be expected to respond to complaints inside and outside any eventual scheme once the pause ends. In most cases they will have up to eight weeks after May 31, 2026 to issue a final response to out-of-scheme complaints, depending on when the original complaint was received.
The motor finance work sits alongside wider FCA interventions in retail motor insurance. More than 270,000 motorists are set to receive a collective £200 million in compensation after a multi-firm review identified issues in vehicle valuation and settlement practices, prompting insurers to overhaul how they handle total-loss and theft claims.
The FCA has also reminded consumers that they should first complain directly to their insurer or lender and, if unresolved, escalate to the FOS rather than immediately turning to claims management companies.
It has reiterated that there is no requirement to use a third-party claims firm to access redress, a point likely to gain prominence once any motor finance scheme and the resumption of complaint handling take effect.
Leasing complaints are excluded from the proposed compensation scheme and from this further extension of the pause. Firms must start sending final responses to motor leasing complaints from December 5, 2025, in line with standard rules and will have to retain relevant records until April 11, 2031, with final scheme rules expected in February or March 2026.
