On 01 May 2026 the FCA redress scheme faced legal challenge on behalf of both consumers and lenders. This resulted in the scheme, which had been established only a month earlier being suspended pending the outcome of these challenges. We are now starting to get more information regarding these challenges and how the FCA is likely to proceed. From information provided by the FCA, it appears that it is being argued that the rules governing the scheme (the Rules) are unlawful and the Upper Tribunal is being asked to ‘quash’ or invalidate them on that basis. The challenges are directed to all three of the ‘relevant arrangements’ with which the scheme is concerned: discretionary commission arrangements, high commission arrangements and tied arrangements. It appears that the Upper Tribunal has been asked to resolve :. The FCA’s power to make the Rules, and its approach to identifying consumers’ losses in deciding that it has that power. The application of the Rules to agreements entered into before 1 April 2014. The FCA’s application of the law relating to limitation periods and therefore what compensation is payable. Whether the FCA can presume that: there was an ‘unfair relationship’ (within the meaning of s 140A of the Consumer Credit Act 1974) between lender and consumer wherever a relevant arrangement was not adequately disclosed; and if so, whether the FCA can presume that it caused the consumer to suffer loss or damage. The Rules governing the calculation of redress. The FCA’s application of its statutory objective of protecting and enhancing the integrity of the UK financial system. Alleged unlawful interference with lenders’ property rights under the Human Rights Act 1998. Where does this leave us now? Whilst it is unclear when the case will be heard, it is unlikely to be before October 2026, until then the FCA Redress Scheme is in limbo. The FCA are currently advising all firms to continue any preparations required under the scheme until further notice and will provide further guidance as it becomes available. Work that can be done now and would likely be needed in all scenarios includes: Identifying relevant complaints; Gathering the data needed regarding commission arrangements and disclosure practices; and Cooperating fully and promptly with the Financial Ombudsman Service on any existing complaints that have been referred to it. Complaints that are entirely outside the scope of the scheme should continue to be progressed in the usual way. Please note that this is a very fluid situation and this advice is general in nature. We will endeavour to keep you informed, so watch this space. Should you wish to review the FCA press release in detail, you can find it here [1] Don’t forget, as an RMI member you have access to the RMI Legal advice line, as well as several industry experts. Should you have any questions, please contact us at any stage for advice and assistance as appropriate. Motor Industry Legal Services Motor Industry Legal Services provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only regulated law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.