UK Car Finance Compensation: Where the FCA Redress Scheme Stands Now
If you bought a car on finance in the UK between 2007 and 2024, you may be owed compensation over hidden commission paid to dealers. The Financial Conduct Authority (FCA) has set out a redress scheme, but legal challenges mean payments are on hold for now. Here is where things stand as of October 2026.
Quick answer: The FCA’s scheme covers car finance agreements taken out from 6 April 2007 to 1 November 2024 where commission was not properly disclosed. The FCA estimates the average payout at around £829 per agreement. Court challenges will be heard from 16 to 26 February 2027, and lenders do not have to pay compensation until those are resolved.
1. What the scandal is about
Many car finance deals were arranged by dealers who earned commission from the lender. In some cases, the dealer could set a higher interest rate to earn more commission, known as a discretionary commission arrangement (DCA). Customers often were not told, or were not told clearly. The FCA banned DCAs in 2021 and has now designed an industry-wide scheme to compensate affected customers.
2. Who may qualify
Under the scheme announced on 30 March 2026, you are generally covered if your agreement was taken out between 6 April 2007 and 1 November 2024 and you were not clearly told that:
- the dealer or broker could raise your interest rate to earn more commission (a DCA);
- the commission was high (at least 10% of the loan or 39% of the total cost of credit); or
- the dealer worked with only one lender without looking for other deals (unless there was a clear link to a car manufacturer’s own finance company).
Some agreements are excluded, for example where commission was very small (£120 or less before April 2014, £150 or less after), no interest was charged, or the lender can show the deal was fair. Around 12.1 million agreements are expected to be eligible.
3. How much you could get
The FCA estimates an average payout of about £829 per eligible agreement. Payments combine a refund of commission and an estimated loss based on the interest you paid, plus interest at the Bank of England base rate plus 1% (minimum 3% a year). Some payouts are capped so customers are not put in a better position than if they had been treated fairly. If you had several qualifying agreements, you could receive several payments.
4. Why payments are on hold
The scheme is being challenged in court by a consumer group, which argues payouts should be higher, and by three lenders. Both challenges are due to be heard between 16 and 26 February 2027, with a judgment expected in the following months. Until then, according to Which?, lenders do not need to calculate or pay compensation, even if you have already complained. The FCA has said it will defend the scheme.
5. What you should do now
- Find your old agreements. Look for paperwork or emails, or check your credit report, which lists past finance agreements.
- Complain directly to the lender if you think you were affected. It is free, and the FCA still recommends it. If you have already complained, you do not need to do anything else for now.
- Keep your contact details up to date with lenders, as the scheme is designed for lenders to contact eligible customers.
- Be wary of claim firms. Claims management companies and law firms can take up to 30% of any payout. The FCA, SRA, ICO and ASA have set up a taskforce to tackle poor practices.
6. Watch out for scams
Fraudsters may pose as lenders or “the FCA compensation team”. Genuine lenders will not ask you to pay a fee to receive compensation, and the FCA does not contact consumers to arrange payouts. Never share bank login details or one-time passcodes.
Thinking about car finance today? Our explainer on APR, fees and how to compare loan offers applies to car loans too.
Frequently asked questions
When will car finance compensation be paid?
There is no confirmed date. Payments are effectively paused until the court challenges heard in February 2027 are decided.
Do I need a claims company?
No. You can complain to your lender yourself for free.
Can I go to court instead?
You can opt out of the scheme and pursue your own claim, which could lead to a larger payout but carries risk and possible legal costs.
Does the scheme cover personal contract purchase (PCP) and hire purchase?
Yes, regulated motor finance agreements such as PCP and hire purchase can be covered if they meet the criteria.