Car finance compensation could help millions of UK drivers after a major update from the Financial Conduct Authority (FCA).
The FCA has confirmed a motor finance compensation scheme. It covers some agreements where firms may not have explained commission clearly.
In some cases, customers paid more without a clear explanation. As a result, drivers with PCP or hire purchase agreements could fall within scope of the confirmed scheme. For more detail on how the FCA redress scheme for car finance works, read our dedicated guide.
The FCA says around 12.1 million agreements may now fall within the scheme. It also says the average payout could be around £830 per agreement. However, payment timing may change because the scheme now faces legal challenges.
Latest update: May 2026
On 1st May 2026, the FCA confirmed that its motor finance compensation scheme had been legally challenged.
The challenges may affect the final timetable. However, the FCA still says drivers should complain directly to their lender if they have concerns.
On 6th May 2026, the FCA also announced a review into claims management practices. This review will look at issues such as misleading adverts, aggressive marketing, unfair exit fees, and unclear sign-up processes.
You do not need to use a claims management company to complain. However, some drivers prefer support with checking old finance agreements and dealing with lenders.
Why the FCA Is Introducing a Compensation Scheme
The FCA began investigating the motor finance market after concerns about car finance mis-selling.
Many lenders let dealers earn commission on finance agreements. In some cases, the commission model gave dealers an incentive to increase the interest rate.
This meant the higher the interest rate, the more commission the dealer could earn.
Customers often did not know these commission arrangements existed. These deals are commonly known as hidden commissions in car finance.
Because of this lack of transparency, many motorists may have paid more than they should have for their finance agreement.
The FCA has now confirmed a compensation scheme to provide car finance compensation to affected drivers.
What the Implementation Period Means for Car Finance Compensation
The FCA has confirmed that lenders will receive a short implementation period before car finance compensation payments begin.
During this time, finance companies will:
- review historic agreements
- update internal systems
- identify drivers who may qualify for compensation
This preparation period should help firms process cases more efficiently.
The FCA has now removed scheme dates while the legal challenge continues. It says the challenge will delay payouts, and it will confirm the scheme timeline when it can.
However, drivers can still complain to their lender now if they have concerns.
Even so, the scheme could still lead to large-scale compensation across the UK.
When Will Car Finance Compensation Be Paid?
The FCA confirmed the motor finance compensation scheme on 30th March 2026. It then confirmed on 1st May 2026 that the scheme had been legally challenged.
The final payment timetable is now uncertain because of the legal challenge.
However, the FCA says drivers who complain before the scheme starts should have their case assessed sooner. So, it may still help to complain to your lender now.
Drivers who used car finance between 6th April 2007 and 1st November 2024 may qualify. However, not every agreement will fall within scope.
Who Could Be Eligible for Motor Finance Compensation?
Many motorists may have been affected by mis-sold car finance.
In some cases, lenders let dealers increase interest rates to earn more commission.
As a result, millions of drivers could now fall within scope of the confirmed scheme. However, the FCA has tightened the rules, so agreements with minimal commission, zero APR, or certain visible manufacturer and dealer links may fall outside scope.
You may be affected if you took out:
- PCP finance arranged through a dealership
- Hire purchase finance agreements
- Car finance deals where commission was not disclosed
The FCA says the scheme may apply where customers were not clearly told about certain commission arrangements. These include DCAs, high commission arrangements, and some tied lender arrangements.
The scheme does not cover every agreement. For example, some zero-interest deals, low-commission cases, and high-value loans may fall outside scope.
If this happened, your agreement may fall within scope.
Which agreements may not qualify for car finance compensation?
Not every agreement will qualify under the FCA scheme. The FCA says some cases will fall outside scope, including agreements with minimal commission, zero APR deals, and some tied arrangements where the lender can show clear visible links with the manufacturer and dealer. Some higher-value cases are also outside the mass-market scheme, although those consumers may still have other routes to complain.
How Hidden Commission Car Finance Worked
Under certain commission models, dealers could adjust the interest rate offered to customers. This system was known as discretionary commission arrangements.
Because dealers earned more commission when interest rates increased, some customers paid more than they should have.
Many drivers did not know these arrangements existed.
Why Drivers Should Check Their Motor Finance Compensation Now
The FCA estimates that millions of drivers still do not know they were affected.
Checking your motor finance compensation position now can help you prepare for the confirmed scheme. If you complain before the scheme starts, your lender should assess your case sooner than if you wait to be contacted. However, payment dates may still depend on the legal challenges.
Many people signed finance agreements years ago, so they may not realise their deal included hidden commissions.
Finding your agreements now could help you understand whether your finance may fall within scope.
Key benefits of a single compensation scheme
A single scheme can deliver more consistent outcomes across the market. It can reduce backlogs, limit mixed results, and give drivers a clearer route to compensation. Lenders also gain more certainty, which should help the process run more smoothly and fairly.
The scheme could also reduce stress for consumers. Drivers would know what information matters, what timeframes apply, and what happens next. That clarity could make a real difference.
Do you need a claims management company?
You do not need to use a claims management company to complain about car finance. You can complain to your lender directly for free.
However, some drivers want support because they no longer have their agreement documents. Others may not know which lender arranged their finance.
If we find a possible claim, we will explain your options before you decide what to do next.
What drivers should do now
If you took out PCP or hire purchase car finance, check your old paperwork now.
Try to find your lender, agreement date, vehicle details, and any documents about commission.
You can also check old bank statements or credit files if you cannot remember your lender.
The FCA scheme could still lead to compensation for affected drivers. However, the final timetable may change because of the legal challenges.
If you want to check whether your agreement may be affected, you can use our short survey to find your agreements.
Car Finance Compensation FAQs
Car finance compensation may be paid to drivers affected by hidden commission arrangements in car finance agreements.
Drivers who arranged PCP or hire purchase finance through a dealership may qualify if the lender did not disclose commission payments clearly.
The FCA says average payouts could be around £830 per finance agreement, although the final amount will vary by case.
The FCA has confirmed that the scheme now faces a legal challenge. This will delay payouts, and the FCA has removed dates until it can confirm the scheme timeline.
However, drivers can still complain to their lender now if they have concerns.
No. You do not have to use a Claims Management Company. You can complain to your lender yourself for free. However, you may choose to use support if you want help checking old agreements or contacting lenders. You can also find more information from the Financial Ombudsman Service and MoneyHelper.
No. The FCA has tightened the scheme, so agreements with minimal commission, zero APR, and some visible manufacturer-linked arrangements may fall outside scope.
The FCA has confirmed that the scheme faces legal challenges. It has not withdrawn the scheme. However, these challenges may affect the final timetable.
Yes. You can complain to your lender directly for free. You do not need to use a claims management company or legal firm.
