FCA Car Finance Compensation Scheme: Why Millions Might Miss Out — and How to Make Sure You Don't

The Financial Conduct Authority (FCA) is preparing to launch a sweeping consumer compensation programme, aimed at reimbursing motorists who were mis-sold car finance agreements. The initiative is expected to cover millions of contracts arranged between April 2007 and November 2024, with average payments anticipated at around £700 per claimant.

The scheme follows years of scrutiny into how car dealers and lenders structured finance through discretionary commission models. These allowed brokers to raise a customer's interest rate to increase their own commission, a practice the FCA has ruled to be unfair and contrary to consumers' interests. The regulator plans to return overpaid costs to affected borrowers through a formal redress process, set to open in 2025.

While the total compensation could amount to several billion pounds, the FCA has cautioned that some motorists may still miss out if they do not act promptly or cannot supply sufficient documentation to prove their eligibility.

Who Will Be Eligible

The scheme will apply to hire purchase (HP) and personal contract purchase (PCP) agreements taken out between 6 April 2007 and 1 November 2024, where discretionary or undisclosed commissions were involved. Eligibility depends on the type of finance, the role of the broker or dealer, and whether commission structures were properly disclosed.

Consumers who used standard bank loans, purchased vehicles outside the qualifying dates, or had complaints already settled by the Financial Ombudsman Service are unlikely to be eligible. The FCA has also clarified that not every borrower under commission-based arrangements will automatically receive compensation, as firms must demonstrate that excessive or unfair costs were charged.

Why Many Could Miss Out

Despite the scale of the redress, millions of motorists could still fail to claim what they are owed. Many may be unaware their finance agreements included commission structures, particularly if their contracts date back more than a decade. Others may struggle to provide documentation that supports their claim.

Timing is also crucial as consumers who do not submit a complaint before the scheme launches may face longer waits or miss the deadline altogether, as reported by The Guardian. Once the scheme begins, lenders will have fixed response periods, and those who have already raised complaints are expected to be prioritised.

Preparing to Claim

The FCA urges motorists to begin gathering relevant documents such as contracts, finance statements and dealer communications ahead of the scheme's launch. Anyone who suspects they were affected should contact their finance provider in writing to file a complaint about undisclosed or excessive commission. Doing so early will help ensure their case is considered once redress assessments open.

The regulator has also advised consumers to avoid claims management companies, which often charge significant fees for services that will be free of charge. Claims can be made directly to lenders and, if necessary, escalated to the Financial Ombudsman Service.

When Payments Will Begin

Consultations on the final structure of the redress process are expected to conclude in 2025, with compensation payments likely to begin in 2026 after lenders complete reviews of eligible cases. The total compensation bill could reach several billion pounds, depending on how many valid claims are received.

Although not all borrowers will qualify for payments, the FCA's initiative represents one of the most comprehensive efforts yet to address widespread mis-selling in the motor finance sector. Those who act early, maintain records and lodge formal complaints are likely to be best positioned to receive compensation once the scheme is in motion.