FCA car finance compensation: pause on complaints to lift in May 2026

Drivers who believe they have a legitimate claim against their motor finance provider for failing to disclose commissions should expect an answer to their complaint by the end of May next year, the Financial Conduct Authority (FCA) has said.

The FCA allowed firms to pause the handling of some car finance complaints in January 2024. This was, it said, to “prevent disorderly, inconsistent and inefficient outcomes for consumers” and knock-on effects on firms and the market while the FCA assessed whether there had been “adequate disclosure” of commissions between motor finance lenders and brokers.

But the regulator said it now has legal clarity from the Supreme Court and High Court to proceed with setting out how firms should deal with very large numbers of complaints.

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The FCA is also reverting back to the usual six months that consumers will have to refer a complaint to the Financial Ombudsman Service for final responses sent after 29 January 2026.

“It is important that complaints are now dealt with promptly, not least as some consumers have been waiting almost two years for an answer. We are clear that complaints cannot be paused indefinitely,” the FCA said.

Millions of drivers who unknowingly paid commissions on car finance agreements are in line for compensation of around £700 for each car loan they took out – but a consultation on the new industry-wide redress scheme is set to take longer.

The payouts, due to 14 million drivers who used car finance, are still due to start early next year, according to the Financial Conduct Authority (FCA), which is setting up the scheme.

But the City watchdog said it has heard feedback that analysis of the extensive market wide data by car finance firms will take time so the deadline to respond to its consultation on a redress scheme has been moved from 18 November to 12 December 2025.

The FCA said: “We continue to welcome and encourage responses before then, including on those consultation questions that may take respondents less time to answer.

“In parallel, we’ll continue our extensive engagement with a wide range of stakeholders, including once the consultation has closed.

“We still expect to publish final rules in early 2026. That will now be either February or March.”

Based on the number of consumers the FCA estimates could take part, lenders could pay out £8.2 billion in compensation, the regulator said, far below its initial estimates of £18 billion.

Nikhil Rathi, chief executive of the FCA, said: “Many motor finance lenders did not comply with the law or the rules. Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.”

What is motor finance compensation for?

Motor finance companies are being forced to pay up because the FCA found they broke laws and regulations in force at the time by failing to disclose important information about the finance deals they sold car buyers.

This led to unfairness, with consumers denied the chance to negotiate or find a better deal and, in some instances, paying more for their loan.

The FCA said its proposed industry-wide compensation scheme is “the best, most efficient way of getting compensation to those owed it”, adding it would make it simpler for those who would otherwise struggle to claim.

It has previously warned motorists about scam car finance compensation calls, for example, and about using unnecessary and expensive claims management companies.

Almost half of those aware of possible compensation, but who had not yet made a claim, (46%) said a lack of clarity on whether a claim would be eligible was a barrier to pursuing one, according to research commissioned by the FCA.

However, 81% of those who were considering making a claim said a compensation scheme would give them the confidence to do so.

The FCA has launched a consultation on its proposed scheme, where consumers as well as the motor finance industry can feed back their thoughts.

Richard Pinch, senior risk director at financial services consultancy Broadstone, said the FCA appears to have listened to the lenders’ calls for more time by extending the consultation deadline.

Pinch said: “It is clear that collecting and analysing market data is already proving to be a challenging exercise for lenders demonstrating the immense complexity of implementing such a compensation scheme.

“The consultation has provoked concern throughout the motor finance market and it is likely that lenders and other firms representing the market will request significant changes to be made to the final rules.”

How the FCA’s motor finance scheme would work

The FCA’s motor finance scheme would cover motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker.

Those who are concerned they weren’t told key details about their motor finance arrangement – for example, about commission payments – should complain to their lender now if they haven’t done so already.

There’s no need to use a law firm or claims management company – people can submit their own complaint using a template letter on the FCA’s website. Those who choose to use a claims manager or law firm could lose a significant amount of any compensation owed, the regulator warned.

Once the proposed scheme goes live, lenders will contact those who have already complained. If they don’t hear back after one month, lenders will assume they should review the case.

Those who have already complained before the scheme gets up and running are likely to receive compensation faster, the FCA said.

Those who haven’t complained will be contacted by their lender within six months of the scheme starting. People will be asked if they want to opt-in to the scheme to have their case reviewed. They’ll have six months to decide.

Those motor finance borrowers who don’t receive a letter – for example, because lenders no longer have their details and can’t trace them – will have a year from the scheme starting to make a claim. They will be able to do so by making a claim to their lender directly.

If consumers don’t know who their lender was, there’s information on how to check on the FCA website. The FCA will run an advertising campaign to raise awareness of the scheme.

Am I eligible for car finance compensation?

People will only receive compensation under the planned scheme if they weren’t told details of at least one of three arrangements between the lender and the broker who sold the loan, often a car dealer, which are found in some motor finance agreements:

1. A discretionary commission arrangement, which allowed the broker to adjust the interest rate the customer would pay to obtain a higher commission.
2. A high commission arrangement (35% of the total cost of credit and 10% of the loan).
3. A contractual arrangement or tie between the lender and broker, which provided exclusive or near exclusive rights to lenders to provide credit.

There could be rare circumstances in which a lender may be able to show that even if one or more of these features was undisclosed, that there was no unfairness – but the FCA has said that where evidence is missing about what was disclosed, lenders must presume they didn’t give borrowers enough information.

Can I go to the Financial Ombudsman instead?

The FCA will monitor if firms are meeting the proposed scheme’s rules and will act if they’re not. If people disagree with their firm’s decision, they can ask the Financial Ombudsman to assess whether the scheme rules have been followed.

Those with a motor finance complaint about inadequate disclosure of a commission or tie that doesn’t fall within the three criteria – and who are therefore not owed compensation under the proposed scheme – would only get a different outcome from the Financial Ombudsman if it decides the scheme rules weren’t followed.

People in this situation could still make a claim in court if they believed they had lost out.

Consumers can choose not to take part in the FCA’s compensation scheme and instead go to court, where they may get more or less compensation, based on the facts of their case.

However, the outcome of a court claim is uncertain and accounting for legal fees they may pay, many consumers could end up with less. The FCA’s scheme is also likely to be faster and simpler than going to court.