Millions of UK motorists are now in line for payouts after the City regulator confirmed plans to launch a multi-billion-pound redress scheme over mis-sold car finance deals, following the groundbreaking Supreme Court ruling last week.
The Financial Conduct Authority (FCA) says it expects drivers to begin receiving compensation in 2026, with the typical payout expected to be up to £950 – not the ‘thousands’ some claims management companies state. The scheme, covering deals dating back to 2007, could cost lenders between £9bn and £18bn in total.
The FCA has confirmed it will consult on the scheme by October, following the recent Supreme Court ruling that scaled back the wider legal threat to the motor finance industry. However, the watchdog says enough harm has been done by past practices – including so-called discretionary commission arrangements (DCAs) – to justify a formal redress process.
These now-banned commissions allowed dealers to increase customer loan rates in return for higher commission payments from lenders, a practice the FCA outlawed in 2021. Around 14.6 million finance contracts used these arrangements between 2007 and 2020, and a broader range of finance deals up to 2024 may also be included in the final scheme.
The bigger picture
Although individual payouts are likely to remain modest, the total scale of the compensation programme could rival that of the infamous PPI scandal. Consumer champion Martin Lewis warned the industry may still try to resist the scheme, calling for consistency, transparency and swift action to ensure motorists are treated fairly.
The FCA says that lenders will be expected to handle claims ‘consistently, efficiently and fairly’, and that it will monitor their actions closely. Customers are advised not to use claims management companies or lawyers, as doing so could significantly reduce their final payout. Motorists who have already submitted a complaint do not need to take further action at this stage.
What this means for you
If you financed a car between 2007 and 2020 – and possibly up to 2024 – you may be entitled to a payout, even if your agreement has already ended. The scheme will target unfair commission practices, which often left buyers paying more than necessary for their finance.
The good news is that the FCA plans to make the process as simple and accessible as possible. There should be no need to pay a third party or lawyer to help with your claim, and motorists who’ve already complained won’t need to do anything further until the scheme opens.
Most payouts are expected to be less than £950, so it won’t be a windfall and certainly not the scale experienced during the PPI legal action. But it’s money back in your pocket – and recognition that many were treated unfairly during a crucial purchase.
Editor’s view: the legislators get it right for once
If you’ve ever wondered whether that car finance deal from a few years back felt a little loaded in the dealer’s favour – well, you might be right. This FCA scheme is long overdue, welcome news, and should help return some fairness to a part of the market that’s been murky for too long.
First piece of advice I can offer – don’t put in a claim right now, despite some very persuasive advertising from claims management companies out there. If you have a claim ongoing or in the system, you also don’t need to do anything. In short, sit tight, and wait to see what the FCA’s next steps are.
As someone who loves a good-value used car and believes EVs must be priced transparently if they’re to win over hearts and wallets, I’d say this is a rare case of regulators doing the right thing. Let’s just hope the scheme delivers quickly – and that lenders don’t drag their feet or throw more legal roadblocks in the way.
Keith Adams – Editor, Parkers
FAQs: What you need to know about claiming mis-sold car finance
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How do I claim compensation for mis-sold car finance?
Right now, you don’t need to do anything. The FCA says it will consult on the scheme by October 2025 and aims to start issuing compensation in 2026. Once the scheme opens, you’ll be able to make a direct claim through your lender – and the FCA says it will be designed to be simple, free and easy to use.
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Do I need to use a claims management company or solicitor?
No. The FCA has made it clear you do not need to use a claims firm or lawyer to get compensation. Doing so could mean you lose a large chunk of your payout in fees. The scheme will be designed to be straightforward so you can do it yourself.
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What if I’ve already made a complaint?
If you’ve already complained to your lender, you don’t need to do anything else for now. The FCA has paused all investigations until the scheme is finalised. Your existing complaint will be looked at as part of the process, likely starting from December 2025 onwards.
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How much car finance compensation will I get?
Most payouts are expected to be under £950, according to the FCA. The amount will depend on the size of the commission involved in your original finance deal, plus interest. Don’t expect a huge windfall – but it’s still money you may be owed.
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Which car finance agreements are affected?
The scheme will mainly cover car finance contracts from 2007 to 2020 that used ‘discretionary commission arrangements’, where the dealer could increase your interest rate to boost their own commission. A broader group of finance deals up to 2024 may also be included in the final scheme.
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How do I know if my car finance used a discretionary commission?
You probably won’t know from the paperwork – and that’s part of the problem. The FCA says the scheme will work by identifying the type of agreement you had and checking whether it falls within the scope. When the scheme launches, you’ll be told how to check if you’re eligible.
At Parkers, we’ve been warning readers about expensive commission-laden finance deals for years. While most people won’t get life-changing money back, this is a big moment for consumer rights – and a reminder to always shop around, check the APR, and question what you’re really being sold.
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