MOTOR FINANCE COMPENSATION

FCA Car Finance Redress Scheme

The Financial Conduct Authority has unveiled a car finance redress scheme for motorists who may have been treated unfairly when taking out a finance agreement. This guide explains the scheme’s rules and all the essential facts.

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Latest FCA Update

Scheme is Partially Suspended

The Upper Tribunal has ordered a partial suspension of the FCA’s motor finance scheme while legal challenges are considered. The tribunal will hear the case from 14 to 18 December 2026 or from 16 to 26 February 2027. Lenders are still expected to prepare for the scheme, progress claims as far as possible, and inform complainants who are not owed compensation. Payouts are not expected until 2027 at the earliest.

2 JULY 2026

What Is the FCA’s Car Finance Redress Scheme?

The car finance redress scheme is an industry-wide process designed by the UK’s financial regulator to compensate motorists who were treated unfairly because important information about commission arrangements was not adequately disclosed.

For many motor finance agreements, the broker received a commission from the lender for arranging the agreement. These agreements often involved a discretionary commission arrangement (DCA) or overly excessive commission fees. DCAs, which allowed the interest rate to be inflated so the broker received more commission, were banned in 2021. An investigation by the FCA found that customers weren’t given enough information about these arrangements, preventing them from understanding the broker’s financial incentive, negotiating the terms or seeking a better deal elsewhere.

The redress scheme primarily focuses on three areas of financial mis-selling:

- Discretionary commission arrangements (DCAs): The broker could change the interest rate to earn more commission. The FCA banned this agreement model on 28 January 2021. An estimated 10.6 million agreements are affected.
- Unfairly high commission: The commission fee was at least 39% of the total cost of credit and 10% of the loan. An estimated 2.6 million agreements are affected.
- Contractual ties: The broker only used one lender or gave one lender the right of first refusal, as long as there were no visible links between the lender, broker and manufacturer. An estimated 1.1 million agreements are affected.

The FCA has introduced the redress scheme due to the scale of the problem. Processing millions of complaints separately through the court system could lead to further delays and inconsistent outcomes. Therefore, the scheme has been designed to provide a simpler, faster and structured process for affected motorists to receive compensation for financial mis-selling.

The regulator formally unveiled the rules in March 2026, splitting them into two schemes based on when the agreement was taken out to help prevent delays due to potential legal challenges.

Scheme 1: Agreements taken out between 6 April 2007 and 31 March 2014

Scheme 2: Agreements taken out between 1 April 2014 and 1 November 2024

Under the redress scheme, you don’t need to register a complaint to be eligible for or receive compensation. You also do not need to use a claims management company or a law firm to access the scheme. However, using a claims management company or a law firm can be convenient, as professional personnel will handle the paperwork and communication on your behalf.

The Redress Scheme at a Glance

12.1 Million Agreements suspected to be eligible for compensation.

£829 Average payout estimated per agreement.

75% Eligible consumers predicted to make a claim.

£7.5 Billion Total redress expected to be paid to consumers.

Who the Car Finance Redress Scheme Covers

Your motor finance agreement may fall within the FCA’s redress scheme if it meets certain conditions and it involved a relevant commission arrangement that was not adequately disclosed.

Your Agreement May Be Covered If:

You bought a car, van, motorbike or campervan on finance between 6 April 2007 and 1 November 2024.
The agreement was a type of regulated motor finance, including Personal Contract Purchase (PCP) or Hire Purchase (HP).
The lender paid the broker a commission for arranging the agreement.
You were not given adequate information about the commission arrangement.

Your Agreement May Not Be Covered If:

You leased the vehicle, such as through a Personal Contract Hire (PCH) agreement.
The agreement involved minimal commission or interest-free finance.
The vehicle was used for business purposes, not personal use.

Your agreement does not need to be active, so you may still be covered if you’ve settled the finance, no longer own the vehicle, or if the vehicle was repossessed. You can claim for multiple vehicles, and each separate agreement will be assessed individually. The scheme can cover agreements held by consumers who have since passed away, in which case a personal representative can claim on their behalf.

What to Do if You’ve Already Complained

If you have already submitted a complaint to your lender, you should not normally need to submit another complaint for the same agreement. Your lender should identify existing complaints and assess them under the FCA’s redress scheme. The scheme is currently partially suspended while the Upper Tribunal considers various legal challenges, so lenders are not required to pay compensation at this stage. However, they are expected to continue progressing cases as far as possible to ensure payouts can begin quickly in 2027 once the scheme resumes.

Most consumers won’t need to do anything until they have received a response from their lender. Your lender may get in touch to acknowledge your complaint or request more information where needed. While the scheme is suspended, lenders don’t need to confirm if you are owed compensation or offer a settlement amount. However, the FCA has instructed lenders to inform complainants who are not owed compensation.

If your agreement began on or after 1 April 2014 and you complained by 30 June 2026, your lender should tell you by 18 November 2026 if you’re not owed compensation.
If your agreement began before 1 April 2014 and you complained by 31 August 2026, your lender should tell you by 18 January 2027 if you’re not owed compensation.

What Happens if You Haven’t Complained Yet?

If you haven’t submitted a claim yet, don’t worry, as there is still time to get your complaint in. The FCA has not announced any deadlines for claiming under its redress scheme, but consumers who claim sooner are more likely to receive their payout sooner. Although the scheme is partially suspended, the regulator believes it to be the fairest and quickest way to award compensation, and has encouraged motorists to still complain instead of waiting to be contacted.

You can complain directly to the lender yourself for free, and the lender will then be able to progress your complaint in accordance with the FCA’s redress scheme. You can also choose to use a claims management company or a solicitor, who will submit the claim on your behalf, including managing the paperwork and communication. If you cannot remember your lender or old finance agreements, you may be able to find this information through old bank statements or correspondence, or by checking your credit report for previous finance accounts. Alternatively, our free online checker can help you locate all your motor finance agreements, ensuring you can submit a claim for every agreement you were mis-sold on.

Lenders have been told to continue preparing for the scheme as much as possible, and in particular, they have been instructed to inform complainants who are not owed compensation. If you complain now, your lender should tell you within 5 months of receiving the complaint if you’re not owed compensation.

How Much Compensation Could People Receive?

Around £829 Per Eligible Agreement

After a thorough process, including a consultation stage that gathered feedback from various stakeholders, the FCA estimates that consumers entitled to compensation will receive approximately £829 per agreement on average. This figure is not a fixed payment but the estimated average. Some motorists may receive more, while others may receive less compensation. The amount can depend on several factors, such as the commission you paid, the length of the contract, and the interest accrued. Each case is considered separately, so if you were mis-sold on multiple finance agreements, you would receive compensation for each one.

For the most serious cases, the consumer is expected to receive all of the commission they were charged plus the interest paid. However, the FCA expects this to only apply to a relatively small number of cases. For other cases, compensation will be based on the average of estimated loss and the commission paid, plus interest. The FCA will calculate the estimated loss based on an adjustment to the interest rate originally paid, which is 21% for agreements taken out before April 2014 and 17% for agreements since 1 April 2014.

The FCA says that consumers should not be compensated more than if “they had been treated fairly or than those who suffered the most unfairness.” Therefore, compensation is capped at the lowest of:

90% of the commission paid, plus interest
The total cost of credit after allowing for the minimum reasonable cost of borrowing
The actual total cost of credit calculated using a simplified method where full information is unavailable

The redress scheme is currently subject to legal challenges on both the consumer side and the lender side, so these calculations may still change before the scheme resumes. If you have submitted a claim with PCP Claim UK, we will keep you updated on the progress of your complaint and how much compensation you are expected to receive.

When Will Car Finance Redress Payments Be Made?

Lenders are not currently required to calculate or pay compensation under the FCA’s redress scheme until the Upper Tribunal proceedings have concluded and the scheme is given the go-ahead to resume. The legal challenges are due to be heard on 14 to 18 December 2026 or 16 to 26 February 2027, with a judgement expected in the following months. Therefore, payouts are not likely until later in 2027, as long as the scheme is upheld and there are no further appeals or delays.

Despite the legal challenges, motorists are still being encouraged to submit their complaint as soon as possible so they are in the queue for compensation when the scheme resumes. Under the scheme’s existing rules, there would be a short implementation period after which lenders would have three months to inform complainants if they’re owed compensation and how much. They would have six months to contact consumers who are owed money but have not yet complained. Once the consumer has accepted a compensation offer, the lender would have one month to make the payment. These rules, however, may change once the scheme resumes.

Lenders can still choose to make a voluntary settlement offer outside of the redress scheme. It is up to the consumer whether they want to accept or refuse this offer. If an offer is accepted, they are unlikely to be able to use the redress scheme to receive more compensation. If an offer is rejected, the complaint will remain active and resume once the redress scheme is upheld.

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Frequently Asked Questions

No. Four parties, including lenders and consumer advocacy group Consumer Voice, have brought separate legal challenges against the scheme. The Upper Tribunal has partially suspended the scheme while it considers all arguments. Lenders must consider completing work that is not covered by the suspension.

No. You can complain to your lender and participate in the scheme yourself for free. You may choose to use a solicitor or claims management company if you want help tracing agreements, preparing the complaint or managing the process.

Yes, as long as the agreement has been mis-sold as per the redress scheme’s requirements. Eligibility and compensation will be assessed separately for each agreement.

If you have the legal authority to manage the affairs of a deceased person, you can submit a complaint on their behalf if they had a mis-sold agreement. You will typically need to provide proof, such as a Will or Grant of Probate.

No. £829 is the FCA’s estimated average for agreements that are eligible for compensation. Your actual payment will depend on several factors, including the commission, interest and length of the contract. Therefore, you could receive more or less than this figure.