FCA Confirms Motor Finance Redress Scheme: What Does It Mean for UK Customers?
• April 3, 2026
When I first looked into the FCA redress scheme, I realised the details were spread across FCA statements, policy papers and consumer advice pages. To make things easier, I pulled together the key information in one place.
The FCA has confirmed that millions of UK customers who used motor finance between 2007 and 2024 could be entitled to compensation. The scheme applies to undisclosed commission arrangements, with average payouts expected to be around £829 and claims available until 31 August 2027.
The key FCA redress scheme points to remember are:
- Agreements from 6 April 2007 to 1 November 2024 may qualify
- The average compensation payment is expected to be around £829
- Roughly 12.1 million motor finance agreements are eligible
- Customers can still complain even if they no longer own the car
- The final deadline to complain is 31 August 2027
What Is the FCA Redress Scheme for Motor Finance Customers?
The FCA redress scheme is an industry-wide compensation programme for people who used motor finance and were treated unfairly. It covers agreements where lenders or brokers failed to explain commission arrangements that may have affected the cost of your finance deal.
The FCA has concluded that many customers were not given enough information to make an informed decision. As a result, some customers may have paid more interest than necessary on their car finance agreement.
An FCA spokesperson said:
“We are going ahead with a scheme to compensate motor finance customers who were treated unfairly.”
The scheme applies to finance agreements where commission was paid by the lender to the broker or dealership. It covers car, van and motorbike finance, including PCP and Hire Purchase agreements.
Which Motor Finance Agreements Are Covered by the FCA Redress Scheme?
The FCA redress scheme applies to motor finance agreements taken out between 6 April 2007 and 1 November 2024, provided that a lender paid commission to the broker or dealership arranging the finance.
This includes common types of vehicle finance such as Personal Contract Purchase (PCP), Hire Purchase (HP), and some other secured motor finance agreements. It does not matter whether you bought a new or used car, van or motorbike.
If the commission formed part of the deal and it was not properly disclosed, your agreement could potentially fall within the scheme.
However, the FCA has divided the compensation process into two separate time periods.
Why Are There Two Separate Redress Schemes?
The first scheme covers agreements from 6 April 2007 to 31 March 2014. The second covers agreements from 1 April 2014 to 1 November 2024.
The FCA decided to split the scheme because there may be legal challenges over its authority to cover agreements before April 2014.
By creating two separate schemes, compensation for later agreements should not be delayed if there is a dispute over the earlier period.
| Redress Scheme | Agreement Dates Covered | Reason for Split |
|---|---|---|
| Scheme 1 | 6 April 2007 to 31 March 2014 | Earlier period could face legal challenge |
| Scheme 2 | 1 April 2014 to 1 November 2024 | Allows later claims to continue without delay |
Most people with agreements in either period can still complain and potentially receive compensation.
Who Could Be Eligible for FCA Motor Finance Compensation?
You may qualify for compensation if your lender or broker failed to tell you about one of three types of commission arrangements.
According to the FCA, these arrangements may have created an unfair relationship because customers were not given enough information to understand how the finance was being sold.
In many cases, customers believed they were simply being offered the best available finance rate. In reality, some brokers and dealers had financial incentives to increase the cost of the agreement or steer customers towards a particular lender
Discretionary Commission Arrangements
A discretionary commission arrangement, often called a DCA, allowed the dealer or broker to increase the interest rate on your finance agreement. In return, they earned a larger commission.
For example, two customers with similar financial circumstances could have been offered different interest rates simply because one dealer wanted to earn more commission.
High Commission Arrangements
The FCA also includes cases where the commission was especially high. A finance agreement may qualify if:
- The commission was at least 39% of the total cost of credit
- The commission was at least 10% of the loan amount
Contractual Ties Between Lenders and Dealers
Some agreements involved a lender giving a dealer exclusive rights or a “right of first refusal”. This meant the dealer pushed customers towards one lender rather than offering the best available deal.
You may qualify if you were not clearly told about that relationship.
| Type of Arrangement | What It Means | Could It Qualify? |
|---|---|---|
| Discretionary Commission Arrangement | Dealer could increase your interest rate to earn more commission | Yes |
| High Commission Arrangement | Commission was unusually large compared with the loan | Yes |
| Contractual Tie | Dealer only offered or preferred one lender | Yes |
Who Is Excluded from the FCA Redress Scheme?
Not every customer with motor finance will receive compensation. The FCA has tightened the rules so only customers who were genuinely treated unfairly are included.
You are unlikely to qualify if:
- The commission was £SSSSSS120 or less before April 2014
- The commission was £150 or less from April 2014 onwards
- Your agreement had a 0% APR or no interest
- The dealer did not actually use the discretionary commission arrangement
- The lender and dealer relationship was obvious through branding or manufacturer links
- Your loan was unusually high in value compared with other loans that year
- You have already accepted compensation or won a court case about the agreement
For example, if you bought a car from a branded dealership where it was obvious that the dealer only worked with one finance company, the FCA may decide that the relationship was sufficiently clear and no compensation is due.
The FCA estimates that these tighter exclusions reduce the number of eligible agreements from 14.2 million to around 12.1 million.
A senior FCA official stated:
“We have tightened eligibility so only those treated unfairly receive compensation.”
How Much Compensation Could You Receive Under the FCA Redress Scheme?
The FCA expects the average compensation payment to be around £829. However, the amount you receive will depend on the type of agreement you had and how unfairly you were treated.
Around 90,000 customers with the most serious cases could receive all of the commission paid, plus interest.
These are usually cases where:
- There was an undisclosed discretionary commission arrangement or contractual tie
- The commission was at least 50% of the total cost of credit
- The commission was at least 22.5% of the loan amount
For most people, compensation will be based on a “hybrid remedy”.
This means you receive the average of:
- The estimated financial loss caused by the unfair commission
- The amount of commission paid by the lender
Interest will then be added on top.
How Is Compensation Calculated?
The FCA has introduced different calculations for agreements before and after April 2014. Earlier agreements are expected to receive slightly more because the regulator believes customers suffered greater losses during those years.
| Agreement Period | FCA APR Adjustment | What It Means |
|---|---|---|
| Before 1 April 2014 | 21% | Higher compensation due to larger historic losses |
| From 1 April 2014 | 17% | Lower adjustment for more recent agreements |
In some cases, compensation will be capped. The FCA says customers should not end up in a better financial position than if they had originally been treated fairly.
Around one in three cases may receive less than the full hybrid remedy because of these limits.
What Interest Will Be Added to Your Compensation?
Interest is an important part of the FCA redress scheme because many agreements date back several years. In some cases, the interest added could significantly increase the final amount you receive.
The FCA has confirmed that interest will be based on:
- The annual average Bank of England base rate
- Plus an extra 1%
- With a minimum interest rate of 3% each year
This means customers with older agreements may receive significantly more than the original commission amount.
An FCA representative explained:
“Millions of consumers will be compensated this year, most of the rest by the end of 2027.”
What Should You Do if You Think You Were Affected?
If you had PCP or Hire Purchase finance between 2007 and 2024, it is worth checking whether your agreement could qualify. Even if you no longer own the car or no longer have the paperwork, you may still be able to make a complaint.
Steps to Take Now:
- Find old finance paperwork, emails or bank statements
- Check which lender provided your finance agreement
- Submit a complaint directly to the lender if you have not already
- Keep copies of all letters and emails
- Watch for messages from your lender during 2026 and 2027
Many people are choosing to complain now rather than waiting to be contacted. If you complain before the end of the implementation period, you are likely to receive a decision sooner and avoid the risk of delays
Real-Life Example
I spoke to a customer from London who told me he bought a used car on PCP in 2016 without realising the dealer could influence the interest rate. When he later heard about the FCA redress scheme, he decided to contact his lender straight away.
He said:
“I bought a used car on PCP in 2016 and never realised the dealer could change the interest rate. Once I heard about the FCA redress scheme, I contacted my lender straight away. I’d rather know where I stand than wait another year.”
From what I’ve seen, acting early like this can also help avoid missed deadlines or lost paperwork.
Should You Complain Now or Wait for the Lender to Contact You?
The FCA says lenders only need to contact people who are potentially owed compensation. That means not everyone will automatically hear from their finance company.
If you have already complained, your case should move faster. Lenders will have three months after the implementation period ends to tell complainants whether they are due compensation.
If you wait to be contacted, the process could take longer because firms have up to six months to write to customers they believe may be eligible.
For that reason, making a complaint now is usually the safer option.
When Will FCA Motor Finance Compensation Be Paid?
The FCA has given lenders a short period to prepare before compensation payments begin. The timetable depends on when your agreement was taken out.
| Stage | Date |
|---|---|
| Scheme for post-2014 agreements begins | 30 June 2026 |
| Scheme for pre-2014 agreements begins | 31 August 2026 |
| Lenders must respond to complainants | Within 3 months |
| Lenders must contact other eligible customers | Within 6 months |
| Final date to complain if not contacted | 31 August 2027 |
Most compensation payments are expected during 2026, particularly for people who have already submitted a complaint. The majority of remaining claims should be settled by the end of 2027.
What Happens if Your Lender Says You Are Not Eligible?
If your lender decides that you do not qualify under the FCA redress scheme, they must explain why.
You can challenge that decision through the Financial Ombudsman Service if you believe the lender has applied the rules incorrectly. This could happen if the lender claims the commission was properly disclosed or says your agreement falls outside the scheme.
You may also have the option of taking legal action through the courts, although this is likely to be slower and more expensive than using the FCA scheme.
How Does the FCA Redress Scheme Affect Bankrupt, IVA or DRO Customers?
If you were bankrupt when you took out the finance agreement, any compensation may belong to the Official Receiver rather than to you personally.
For customers in an IVA, the money may need to go towards the arrangement with creditors. If you have a Debt Relief Order, receiving compensation could affect your financial position if it takes your assets above the limit.
Before making a claim, you should speak to:
- The Official Receiver if you were bankrupt
- Your insolvency practitioner if you are in an IVA
- The Official Receiver if you are under a DRO
This is particularly important because some customers may not be entitled to keep the compensation themselves.
What Does the FCA Redress Scheme Mean for UK Customers?
The FCA redress scheme is one of the biggest compensation programmes the UK motor finance industry has ever seen. It gives millions of people the chance to recover money if they paid more because of hidden commission arrangements.
For many customers, the key message is simple: do not wait unnecessarily. If you think you may have been affected, gather your paperwork and contact your lender.
The scheme is designed to be free, easier than court action and faster than years of complaints. With an average payout of £829 and £7.5 billion expected to be returned to customers, it could make a significant difference to households across the UK.
Conclusion
The FCA redress scheme is good news for customers who may have been unfairly charged on motor finance agreements.
It provides a clearer route to compensation, avoids lengthy court battles and sets firm deadlines for lenders.
If you used car finance between 2007 and 2024, there is a real possibility that you could be entitled to money back. The sooner you check your agreement and make a complaint, the sooner you may receive an answer.
FAQs About Motor Finance Redress Scheme
Can you still claim if you no longer own the car?
Yes. The FCA redress scheme is based on the finance agreement, not whether you still own the vehicle.
Does the FCA redress scheme cover PCP and Hire Purchase agreements?
Yes. PCP and Hire Purchase agreements are included if they fall within the qualifying dates and involve undisclosed commission arrangements.
Will every motor finance customer get compensation?
No. Only customers who meet the FCA’s eligibility criteria will qualify. Many agreements with low commission or 0% APR are excluded.
Do you need a claims management company to claim?
No. The FCA scheme is free to use, and you can complain directly to your lender without paying a claims company.
What happens if you cannot find your old finance paperwork?
You can contact your lender directly or check your credit report to identify the finance company and agreement details.
Can you claim if your agreement started before 2014?
Yes. Agreements from 6 April 2007 to 31 March 2014 are covered under a separate FCA redress scheme.
What if your lender says the commission was disclosed?
You can ask the Financial Ombudsman Service to review the decision if you think the lender is wrong.
