FCA car finance scheme: check if you could be owed compensation

The Financial Conduct Authority (FCA) has revealed the details of its car finance compensation scheme. Here’s everything you need to know and what you could be owed.

If you took out car finance between 2007 and 2024, you may be eligible for compensation – it’s worth checking whether you’re eligible.

Following a consultation launched in October 2025, the Financial Conduct Authority (FCA) has confirmed it will go ahead with a scheme to compensate some car finance customers who were treated unfairly.

The scheme has now been split into two periods:

• 6 April 2007 to 31 March 2014
• 1 April 2014 to 1 November 2024

The earlier period will be dealt with separately. If it’s challenged, this will not delay compensation for customers with agreements from April 2014 onwards.

Eligibility has been tightened so only customers likely to have been treated unfairly will be included. Very small commissions and 0% APR loans are excluded, and a contractual tie alone will not qualify where there are clear manufacturer-dealer links. Around 12.1 million agreements are now in scope, down from 14.2 million.

Compensation has been updated to better reflect actual losses too, especially for agreements from 2007-2014. In around one in three cases, payouts will be capped. Total compensation is expected to be around £7.5bn, according to the FCA.

The scheme is designed to be faster and simpler, with millions of payments expected this year and most cases completed by the end of 2027, the FCA said. Lenders will mainly contact eligible customers or people who have already complained, helping speed up payments and reduce costs.

Want to learn more? Here’s how the scheme works, who is eligible, and how to avoid scams.

Why is there a compensation scheme?

The FCA found that some car finance companies didn’t clearly explain how certain deals worked. This lack of transparency meant some drivers may have paid more than they should have or missed out on better deals.

A key issue was commission paid to dealers. In many cases, customers weren’t properly told about these payments, which goes against rules designed to protect consumers.

A Supreme Court ruling in August 2025 found that while commission payments can be legal, failing to disclose them properly can be unfair – and in some cases unlawful.

How will the scheme work?

There will be a short set-up period to allow lenders to prepare. This runs until:

• 30 June 2026 for loans taken out from 1 April 2014 onwards
• 31 August 2026 for earlier agreements

If you have already complained, or complain before the relevant deadline, your case will be dealt with more quickly.

After the implementation period:

1. Lenders will have three months to tell claimants whether they are owed compensation and how much.
2. They will then have six months to contact eligible customers who have not complained. This will only include people who may be owed money or those nearing time limits.
3. If you are contacted, you will have six months to respond if you want to take part in the scheme.

Who could get compensation?

You may be eligible for compensation if you took out a car finance agreement and weren’t told about at least one key arrangement between the lender and the broker or dealer that arranged your loan.

These arrangements include:

• Discretionary commission arrangements (DCAs): where the broker could increase your interest rate to earn more commission.
• High commission deals: where the broker received a very large commission (typically at least 39% of the total cost of credit and 10% of the loan amount).
• Exclusive or tied arrangements: where the lender had a special relationship with the dealer that may have limited the deals offered to you.

There are also some cases where you will not be eligible. For example:

• The commission was very small (generally £120 or less before April 2014, or £150 or less after) and unlikely to have influenced the deal.
• You were not charged any interest on the loan.
• A discretionary commission arrangement was not actually used to increase your interest rate.
• The lender can clearly show that the arrangement didn’t affect your deal, or you would not have received a better offer anyway, or the arrangement was fairly disclosed or didn’t operate in practice.

You will also be excluded if:

• Your case has already been settled by the Financial Ombudsman, a court, or through compensation.
• Your loan was extremely large (higher than about 99.5% of loans in that year), as these are handled outside the scheme.

In most cases, you’ll still be able to bring a claim within six years, and this may be extended where key information about commission or dealer ties was not properly disclosed.

Some cases may be excluded where firms can clearly show commission was properly and prominently disclosed, but they must explain their decision and consumers can challenge it with the Financial Ombudsman Service.

If your case is found to be fair under the scheme rules, you can ask the Financial Ombudsman to check the decision, and you may still be able to take your case to court.

How much compensation could I get?

There is no single fixed payout amount – compensation will depend on your individual agreement.

Most people will receive a payout based on a calculation that considers:

• how much commission was paid, and
• whether you paid more interest because of the way your loan was arranged

This is then adjusted to reflect estimated financial loss and includes interest.

In some cases:

• Around 90,000 cases with the most serious arrangements could receive all commission back, plus interest.
• Most other customers will receive a lower, case-by-case amount based on how much they were affected.

If your case is eligible, your lender will calculate the amount and tell you what you are owed.

The FCA estimated that 75% of eligible consumers will take part in the scheme. This means firms are expected to pay around £7.5bn in compensation.

Non-compensation costs are estimated at £1.6bn, bringing the total expected cost to firms to £9.1bn.

Here’s a breakdown of the costs, according to the FCA:

	Consultation proposals	Consultation proposals, updated	Final policy
Redress at estimated uptake of 75%	£7.3bn	£9.3bn	£7.5bn
Non redress costs	£2.8bn	£2.5bn	£1.6bn
Total (at estimated uptake)	£10.1bn	£11.8bn	£9.1bn
Redress liabilities (100% uptake)	£9.7bn	£12.5bn	£10bn
Eligible agreements	14.5 million	16.8 million	12.1 million
Average redress per agreement	£669	£775	£829

Key things to know about the scheme

• The FCA motor finance redress scheme is free to use – you don’t need to pay to make a claim.
• You don’t need a claims management company (CMC) or a law firm to take part. If you use one, they may take a significant fee from your compensation.
• Be cautious about signing up with multiple CMCs or solicitors, as this could lead to duplicate fees or complications.
• You can report nuisance contact to the Information Commission’s Office (ICO) and misleading adverts to the Advertising Standards Authority (ASA).
• If you use a regulated firm and are unhappy with their service, you can complain to them first and then escalate (to the Legal Ombudsman for solicitors or the relevant regulator for CMCs).

5 tips to avoid scams

While this scheme could help many people get compensation, scammers often target such schemes to trick people into giving away personal information or money. Here’s how to stay safe.

1. Verify official communications

The FCA or your finance provider will never ask for payments upfront or sensitive details such as full bank passwords via email or phone. Always check the sender’s email address and contact the FCA directly through their official website.

2. Beware of unexpected calls or emails

Don’t trust unsolicited calls or messages claiming to be from the FCA or a claims company. Scammers often use pressure tactics to rush you into sharing information or paying fees.

3. Use official channels

Only submit claims through the FCA’s official website or approved redress platforms. Avoid third-party firms unless you’re 100% sure they’re legitimate.

4. Don’t pay to claim compensation

Genuine compensation schemes don’t charge you fees to apply or receive money. Be suspicious if anyone asks for payment upfront.

5. Keep personal information secure

Never share sensitive information such as your bank details, National Insurance number, or passwords unless you’re certain of who you’re dealing with.

If you’ve used car finance, it’s worth checking whether you may be owed money. You could be entitled to compensation, and the new scheme is designed to make it easier to find out and claim than you might expect.

Car change? Carwow!

Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.

Click here to follow us on WhatsApp, where you can keep up-to-date with all the latest news, reviews, advice guides and videos.