Car finance lending redress scheme
The FCA car finance compensation scheme could affect millions of consumers. As a consumer expert, I explain what the car finance compensation scheme means for consumers and what you should do next.
The Financial Conduct Authority (FCA) has published plans for its car lending finance redress scheme, the biggest compensation programme since PPI.
It is estimated that the payout will affect about 14 million motor finance agreements, for a potential total compensation of more than £8 billion.
Statistics in brief
Following the Supreme Court decision on the mis-selling of car finance, the regulator has announced a redress scheme covering Hire Purchase (HP) and Personal Contract Purchase (PCP) car finance agreements. The scheme:
- Covers agreements from April 2007 to November 2024.
- Out of 32 million car finance deals, about 14 million were likely mis-sold.
- Average payout: around £700 per person.
- The consultation runs until November 2025, and the scheme is expected to begin in early 2026.
How car finance was mis-sold
The FCA says car finance mis-selling falls into three categories, all relating to information that was not disclosed to customers.
- Discretionary Commission Arrangements (DCAs) – Dealers earned more commission when they charged higher interest rates and customers weren’t told this.
- Contractually Tied Dealers – Where a dealer told customers it would ‘search a panel’ but in practice had an exclusive first-refusal arrangement with one lender, and didn’t make that clear which potentially left people on costlier finance.
3. Unfairly High Commission – This is where both the commission (what the dealer got paid) was more than 35% of the total cost of credit (total interest and fees you paid over the loan term), and the commission was also more than 10% of the amount you borrowed.
In very extreme cases (over 50% and 22.5%), customers will get all commission and interest refunded.
How much will you get?
The FCA says payouts will be based on 17% of the interest you paid. So, for every £1,000 of interest, you’ll get back about £170. The regulator says it is doing this to keep the process simple and fast. Some consumers may have been charged more or less but the 17% figure reflects the typical extra cost consumers paid due to unfair commissions, based on FCA market data. It’s based on detailed analysis of millions of loans, ensuring evidence-based fairness.
Already complained to your car finance lender?
If you have already complained to your lender, it must write to you within three months to confirm you’re included when the compensation scheme starts in early 2026.
You will be automatically added, unless you opt out. You would only need to do this if you wanted to pursue your matter in court. (You will not be able to opt back in).
If you do nothing, you’ll automatically get your money once the redress process has completed.
Have you already received a final response?
The FCA advice says:
It’s important you contact the Financial Ombudsman by the date given in your provider’s final response letter, or they may not be able to help.
If you have received a final response to a complaint during the following periods:
- For a complaint about a DCA, between 12 July 2023 and 20 June 2024.
- For a complaint about any kind of motor finance commission (including DCAs), between 21 June 2024 and 29 January 2026.
You’ll have until the later of 29 July 2026 or 15 months from the date the final response letter, was sent to take your complaint to the Financial Ombudsman.
If you’ve already been sent a final response and now have more time to take your complaint to the Financial Ombudsman, your provider will write to you and let you know.”
Not yet complained to your car finance lender?
Lenders must identify affected customers and contact them within six months of the FCA scheme launch. Then, those customers will need to opt in to get their money.
If you think you are affected, complain now as you are likely to get your money more quickly.
The FCA has a template letter you can use. Your finance lender should send you an acknowledgement within 8 weeks. If it doesn’t, you should follow up to check that it has received your complaint.
Under the current FCA rules, the finance company won’t have to send you a final response until after 4 December 2025. The FCA is consulting on extending this deadline to 31 July 2026 for certain complaints.
Not got your car finance details?
As the scheme goes back to 2007, it is possible that your car finance lender no longer holds your records, so it is going to be more difficult.
You will need to prove you had finance, e.g. through old bank statements, credit files, or loan paperwork.
If you signed up with a Claims Management Company (CMC)
Hopefully you haven’t done this, as consumer champions advised against it! However, if you have, note that CMCs cannot charge you for work they didn’t do (given everyone was waiting for the judgement there was very little they could do other than receive your details!)
They can only charge a proportionate cancellation fee.
If the CMC does not abide by the above then you can go to the Claims Management Ombudsman (for CMCs) or the Legal Ombudsman (for law firms).
Key dates to remember
- Consultation closes: November 2025
- Scheme starts: Early 2026
- Firms contact existing complainants: Within 3 months
- Firms contact new complainants: Within 6 months
Latest from the FCA – 7 April 2026
FCA announces details of the financial redress scheme and how to claim
Further help with car finance complaints, refunds and consumer rights
All you need to know – car purchasing, financing, insurance & garages
Top 20 Tips on how to complain effectively
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