FCA Redress Scheme 2026: Latest Motor Finance Compensation Update

Last Updated: 25.09.2026

The FCA redress scheme is designed to compensate eligible UK motorists who were treated unfairly when taking out motor finance between 6 April 2007 and 1 November 2024.

Around 12.1 million agreements are estimated to be eligible under the final rules. However, the position changed significantly during 2026.

Legal challenges resulted in parts of the scheme being suspended, meaning lenders currently do not have to calculate or pay compensation while the legal process continues.

If the scheme is upheld and the decision is not appealed, the FCA expects payments to begin in 2027.

Consumers who believe they may be affected can still complain to their lender. A broader look at the car finance compensation scheme can also help explain how commission arrangements became a major consumer finance issue.

FCA Redress Scheme 2026: What Is the Current Position?

As of September 2026, the FCA motor finance redress scheme still exists, but parts of it are temporarily suspended because of legal challenges.

The FCA introduced the final scheme on 30 March 2026. It was intended to create a consistent industry-wide process instead of requiring millions of consumers to pursue individual disputes.

The FCA estimates that approximately 37% of relevant motor finance agreements, or around 12.1 million agreements, may qualify for compensation.

However, the legal challenge has changed the expected timetable.

Lenders do not currently need to calculate or pay compensation under the suspended parts of the scheme. The case is expected to be heard by the Upper Tribunal in either December 2026 or February 2027.

Consumers should therefore distinguish between the scheme being cancelled and being partially suspended. It has not been cancelled.

The FCA’s current car finance claims information provides the official position for consumers.

Why Was the FCA Motor Finance Redress Scheme Introduced?

The scheme was introduced because many motorists were not given sufficient information about commission arrangements between lenders, brokers and vehicle dealerships.

A customer might reasonably have assumed that the dealer was finding an appropriate finance deal. In some cases, however, the commission structure could influence the interest rate offered or which lender was recommended.

The concern became particularly important with discretionary commission arrangements. Under these arrangements, a broker could sometimes adjust the customer’s interest rate, with a higher rate potentially producing a larger commission.

The FCA eventually concluded that dealing with millions of potential cases individually could be slow, inconsistent and expensive. An industry-wide scheme was intended to create common eligibility rules, compensation calculations and complaint procedures.

The regulator says customers may qualify where important information about discretionary commission, unusually high commission or certain contractual ties was not properly disclosed.

How Has the FCA Redress Scheme Changed Over the Years?

The FCA redress scheme did not appear suddenly in 2026. It followed several years of regulatory, legal and complaint-related developments.

One major turning point came in January 2021, when the FCA banned discretionary commission arrangements that gave brokers an incentive to increase the interest rate paid by customers.

Motor finance complaints later increased, and the FCA began further work on historic commission practices. Complaint-handling arrangements were changed while regulators and courts considered how widespread cases should be resolved.

The main timeline then developed quickly:

• 2021: Discretionary commission arrangements were banned
• 2024: The FCA intensified its review of historic motor finance commission complaints
• October 2025: The FCA consulted on an industry-wide redress scheme
• March 2026: Final motor finance redress rules were introduced
• May 2026: Legal challenges to the scheme became a major issue
• July 2026: The Upper Tribunal partially suspended parts of the scheme
• September 2026: The legal challenge remained unresolved

The result is that the FCA redress scheme remains important, but the original 2026 payment timetable should no longer be treated as current.

Is the FCA Redress Scheme Currently Paused?

Parts of the FCA redress scheme are currently suspended rather than the entire process being stopped.

The most important consequence is that lenders do not currently have to calculate compensation or make scheme payments while the relevant legal proceedings continue.

This does not mean consumers should assume nothing can be done.

Customers can still contact their lender and make a complaint. Firms must also continue complying with scheme requirements that were not suspended and can continue preparing records and identifying relevant agreements.

The current delay mainly affects moving eligible cases through compensation calculation and payment.

For consumers, keeping old finance paperwork and lender correspondence remains important.

Where a person is trying to identify an unfamiliar lender or historic financial letter, understanding how financial correspondence and vehicle finance letters can be identified may help them establish which organisation needs to be contacted.

Why Is the FCA Motor Finance Redress Scheme Being Legally Challenged?

The legal challenges concern whether parts of the FCA’s scheme are lawful and whether the regulator has used its powers correctly when designing the compensation framework.

The disputes involve technically complex issues, including the treatment of historic agreements, the legal basis for determining unfairness, compensation methodology and the way certain claims are brought into the scheme.

The Upper Tribunal therefore has to consider whether the FCA’s approach can operate in its existing form.

This matters because the outcome could affect:

• Eligibility: Some categories of agreement could potentially be affected
• Compensation: Calculation rules could be altered
• Timings: Payments may be pushed further into 2027
• Firm Responsibilities: Lenders may need to change implementation processes
• Consumer Complaints: How some existing claims progress could change

Until the case is resolved, consumers should avoid assuming that a compensation estimate is guaranteed.

Which Motor Finance Agreements Are Covered by the FCA Redress Scheme?

The scheme generally concerns qualifying motor finance agreements entered into between 6 April 2007 and 1 November 2024.

It can cover finance used for vehicles including:

• Cars
• Vans
• Motorbikes
• Campervans

Hire Purchase agreements and Personal Contract Purchase agreements can be covered where the other eligibility conditions are met.

The key issue is not simply whether someone used PCP Finance or HP. There must normally also be a relevant commission arrangement that was not properly disclosed.

The FCA estimates that approximately 12.1 million agreements may qualify, although this does not mean every person who financed a vehicle during the period will receive compensation.

Who Could Be Eligible for FCA Motor Finance Compensation?

Eligibility centres on whether the customer was given enough information about certain arrangements between the lender and the broker or dealer.

Three areas are particularly important.

Discretionary Commission Arrangements

A discretionary commission arrangement allowed the broker to influence the interest rate paid by the customer.

In some cases, increasing the customer’s interest rate could increase the broker’s commission.

The FCA considers these arrangements relevant because consumers may not have understood the financial incentive influencing the deal they were offered.

High Commission Arrangements

High commission can also bring an agreement into the scheme.

Under the final FCA rules, this means commission amounting to at least:

• 39% Of The Total Cost Of Credit
• 10% Of The Amount Financed

Both conditions are relevant to the high commission test.

Contractually Tied Arrangements

A contractual tie can exist where the broker used only one lender or gave a particular lender a right of first refusal.

However, this will not automatically produce compensation. There are exceptions where links between the lender, manufacturer and franchised dealer were sufficiently visible to the customer.

Which Motor Finance Agreements Are Not Covered?

Several types of agreements or circumstances can fall outside the FCA redress scheme.

These include:

• Personal Contract Hire: PCH leasing is not included
• Previous Determination: Cases already decided by a court or considered by the Financial Ombudsman may be excluded
• Existing Compensation: Customers who have already accepted compensation may not be able to claim again
• Older High-Value Agreements: Agreements above £25,000 entered into before 6 April 2008 are outside the scheme
• Business Agreements: Certain finance entered into for business purposes is excluded
• High-Value Loans: Loans above the FCA’s annual high-value thresholds may be excluded

High-value loan thresholds vary by year. An exception can apply where the vehicle was adapted for accessibility purposes.

Agreements can also be considered fair where commission was very small or the borrower paid no interest.

How Much FCA Redress Compensation Could Customers Receive?

There is no single guaranteed FCA redress payment.

The FCA currently estimates average compensation at about £830 per eligible agreement, although some customers could receive more and others considerably less.

For most cases, compensation takes account of estimated financial loss, commission and compensatory interest.

The FCA uses different estimated interest-rate adjustments depending on when the agreement began:

• Pre-April 2014 Agreements: A 21% interest-rate adjustment is used in the estimated loss calculation
• From April 2014: A 17% interest-rate adjustment applies

Compensatory interest is then added using an annual rate linked to the Bank of England base rate plus 1%, subject to a minimum of 3% in any year.

The actual amount depends on the individual agreement.

How Do the FCA Compensation Caps Work?

An important part of the scheme that is sometimes overlooked is that compensation is not unlimited.

The FCA expects the final amount to be capped in around one-third of cases.

After compensation has been calculated, it can be tested against three limits.

These include:

• 90% Of Commission: Ninety per cent of commission paid, plus compensatory interest
• Adjusted Cost Of Credit: The difference between the customer’s cost of credit and an estimated low-market cost
• Actual Cost Of Credit: A simpler total credit-cost limit where the adjusted figure cannot be calculated reliably

If the initial compensation calculation exceeds an applicable limit, the amount can be reduced to the lowest relevant cap.

Customers whose interest rate was already within the lowest 5% of rates offered at the time, excluding 0% APR deals, will not normally receive compensation under the scheme.

What Impact Has the FCA Redress Scheme Had on Customers and the Motor Finance Industry?

The FCA redress scheme has had an impact well beyond individual compensation complaints.

For consumers, it has brought historic vehicle finance agreements back into focus.

People who completed their finance years ago may now be checking paperwork, statements and old lender details to determine whether commission affected their agreement.

Some customers may need to obtain information about historic credit arrangements.

The process is not identical for every form of borrowing, but information on historic loan records and Consumer Credit Act document requests illustrates why retaining or obtaining old credit documentation can be important when investigating financial agreements.

For lenders, the impact is operational as well as financial.

Firms need systems capable of identifying historic agreements, locating commission information and applying the FCA’s methodology consistently across potentially very large numbers of cases.

The compensation debate has also increased scrutiny of transparency across consumer finance.

Customers are now more aware that the price of credit can be influenced by arrangements that are not immediately obvious from the headline monthly payment.

What Must Lenders Do While the FCA Redress Scheme Is Suspended?

The partial suspension does not remove every responsibility from motor finance firms.

Lenders can continue preparing for the scheme and progressing work that remains permitted.

This can include identifying complaints, locating relevant agreements and gathering information needed to determine whether an arrangement falls within the scheme.

What they do not currently have to do under the suspended provisions is complete compensation calculations or make scheme payments.

Some customers may still receive decisions where the lender can establish that compensation is not payable under parts of the rules that remain effective.

Consumers should therefore read any lender response carefully rather than assuming that every complaint has simply been frozen.

How Can Customers Make an FCA Motor Finance Complaint?

A customer who believes a historic motor finance agreement could qualify should normally start with the lender.

Helpful information includes:

• Customer Name And Previous Addresses
• Approximate Finance Dates
• Vehicle Registration
• Dealer Name
• Agreement Number If Available
• Copies Of Relevant Statements Or Correspondence

Not having the original agreement does not necessarily prevent a complaint.

Customers can check old bank statements, contact the dealership or review their credit file to help identify a lender.

If an unusual address appears on historic correspondence, verifying the organisation before providing information is sensible.

Guidance on checking whether financial correspondence is genuine highlights the importance of confirming financial firms through independent sources.

Where a lender has issued the relevant redress determination and a consumer believes the rules have not been followed correctly, the Financial Ombudsman Service’s motor finance commission guidance explains when the Ombudsman may become involved.

Do Customers Need a Claims Management Company?

No. Consumers do not need to use a claims management company or law firm simply to make an FCA motor finance complaint.

The process can be started directly with the lender for free.

This is financially important because professional representatives can deduct a substantial share of compensation. Current consumer information warns that fees can reach around 36% including VAT in some motor finance cases.

For example, a person awarded £1,000 could potentially lose hundreds of pounds in charges by using a paid representative.

MoneyHelper’s guidance on mis-sold car finance compensation also advises that consumers can complain themselves and warns about claims-management fees.

Anyone already signed up with a claims company should check the contract before cancelling, as reasonable cancellation fees may sometimes apply.

When Could FCA Motor Finance Compensation Be Paid?

The original timetable expected payments to begin during 2026, but that is no longer a reliable expectation.

Because parts of the scheme have been suspended, lenders currently do not have to calculate or pay compensation under those provisions.

The FCA now states that, if the scheme is upheld and there is no appeal, it expects payments to begin in 2027.

Further appeals or changes ordered following the Tribunal proceedings could create additional delays.

This means consumers should be cautious about websites, advertisements or claims companies promising a specific payout date.

How Can Customers Avoid FCA Motor Finance Compensation Scams?

Large compensation programmes naturally attract fraud attempts.

The FCA has reported scammers pretending to represent lenders and contacting consumers with fake compensation offers. Customers may be asked for bank details, passwords or payments supposedly required to release compensation.

Warning signs include:

• Requests For PINs Or Passwords
• Pressure To Act Immediately
• Unexpected Upfront Fees
• Unverified Payment Details
• Unfamiliar Websites Or Telephone Numbers
• Promises Of Guaranteed Compensation

A genuine postal address or company name is not enough to prove a communication is genuine.

Broader UK financial consumer protections increasingly stress independent verification and complaint rights.

Similar principles apply when consumers deal with changes affecting regulated banks and other financial firms, including the importance of keeping records and understanding financial complaint and consumer protection rights.

Consumers should independently verify their lender before sharing banking information.

Conclusion

The FCA redress scheme in 2026 remains one of the most significant consumer finance compensation programmes in the UK, but the legal challenge has substantially changed its timetable.

Around 12.1 million motor finance agreements are estimated to meet the scheme’s eligibility criteria, with average compensation expected to be around £830 per qualifying agreement.

Eligibility depends on the individual agreement and whether relevant commission or lender ties were inadequately disclosed.

Most importantly, the scheme has not been cancelled. Parts of it are suspended while the Upper Tribunal considers the legal challenges.

Consumers can still complain to their lender, preserve historic finance records and check that any contact about compensation is genuine.

Payments are not currently being calculated or made under the suspended parts of the scheme, with 2027 now the earliest expected starting point if the FCA’s scheme survives the legal challenge without a further appeal.

Frequently Asked Questions

Is the FCA Redress Scheme Still Going Ahead?

Yes. The scheme remains in place, but parts have been suspended while legal challenges are considered by the Upper Tribunal.

Can Customers Still Complain While the Scheme Is Paused?

Yes. Consumers who believe an eligible motor finance agreement was affected can still complain directly to their lender.

What Is the FCA Redress Scheme Deadline?

The scheme has specific complaint and participation deadlines depending on the circumstances. Consumers should check the current FCA rules rather than relying on older 2026 timelines because the legal challenge has affected implementation.

Does the FCA Redress Scheme Cover PCP and Hire Purchase?

Yes. PCP and Hire Purchase agreements can qualify where they meet the scheme dates and other eligibility requirements.

Does Personal Contract Hire Qualify for FCA Redress?

No. Personal Contract Hire leasing is outside the FCA motor finance redress scheme.

How Much Is the Average FCA Motor Finance Compensation?

The FCA estimates average compensation at approximately £830 per eligible agreement. Actual payments will depend on commission, interest, financial loss and the applicable compensation caps.

When Will FCA Redress Payments Start?

The FCA currently expects payments to begin in 2027 if the scheme is upheld and the Tribunal judgment is not appealed. The final timetable remains dependent on the legal proceedings.