FCA to consult on car finance compensation scheme – could you be eligible?
The Financial Conduct Authority will consult on an industry-wide compensation scheme for victims of the car finance scandal. We look at who could be eligible and how much payouts could be.


Some victims of the car finance scandal could be in line for compensation despite the UK Supreme Court partially overturning a judgment calling for redress on Friday (1 August), according to the Financial Conduct Authority (FCA).
The FCA confirmed that it will consult on an industry-wide compensation scheme for people who bought motor finance that failed to provide customers with relevant information on the commission paid by lenders to car dealers.
The details of such a scheme will be published by early October, according to the regulator, with stakeholders to be given the opportunity to provide their views.
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New rules will be proposed to guide how lenders should “consistently, efficiently, and fairly” decide whether or not someone is owed compensation, and how much this will be. The FCA says it will monitor if these firms are following the rules and will act if they are not.
While a final amount is yet to be determined, the FCA said it expects that if a compensation scheme goes ahead, it could cost between £9 billion and £18 billion.
The regulator does, however, caveat this by saying that the ultimate cost of any scheme will depend on its final design, making it difficult to estimate precisely.
It comes after the UK’s Supreme Court ruled that, in some cases, motor finance firms were not complying with rules and failing to properly disclose commission arrangements that may have been both unfair and unlawful.
While the court overturned a previous ruling by the Court of Appeal that awarded compensation to three cases, the Supreme Court upheld one of them, leaving the door open for redress in certain cases.
Nikhil Rathi, chief executive of the FCA, said: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated.
“We also want to ensure that the [motor finance] market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”.
Rathi said they are aiming for a compensation scheme that’s “fair and easy to participate in” and urged consumers not to use a claims management company or law firm, as this could cost a significant chunk of potential compensation awarded.
“'It will take time to establish a scheme but we hope to start getting people any money they are owed next year,” he added.
We explain what a redress scheme could look like for victims of the motor finance scandal, who could be eligible, and how much they could claim.
Who could be eligible for redress?
As the precise details of a compensation scheme are yet to be determined, the exact group of people eligible for such a scheme is unknown.
However, the FCA has outlined some criteria that it thinks the scheme should cover.
For example, the regulator thinks that agreements as far back as 2007 should be included to make the scheme comprehensive and ensure consumers do not have to use other routes to secure compensation
Furthermore, the FCA has proposed that the redress scheme covers discretionary commission arrangements (DCAs), where the broker could adjust the interest rate offered to a customer, if they were not properly disclosed.
If you are concerned you were not told about commission and think you paid too much for your motor finance, the regulator recommends you complain now.
The FCA has a guide to how you can raise a complaint on their website. It's possible to do this yourself. The FCA warns using a claims management company or law firm to make a complaint could cost you around 30% of any compensation paid.
How much could you be owed?
The FCA estimates most eligible individuals will probably receive less than £950 in compensation per agreement.
However, as full details of a redress scheme are unavailable, the precise amount of money that wronged consumers could be owed is still unknown.
The regulator said in a statement that its “methodology for calculating redress will be informed by the degree of harm suffered by the consumer and the need to ensure consumers continue to be able to access affordable loans for motor vehicles.”
Compensation could also be boosted as interest is normally paid on redress awards – the FCA says this will likely be based on the average base rate that year plus 1%.
A compensation scheme is not necessarily guaranteed to be put in place if the FCA’s consultation does not recommend it.
When could a compensation scheme be opened?
As mentioned previously, the FCA’s consultation on whether or not a compensation scheme should be opened will be launched by early October.
The consultation is set to be open for six weeks before a decision over the proposed scheme is made.
If a redress scheme does go ahead, the FCA says it expects the first payments to be made in 2026.
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Daniel is a digital journalist at Moneyweek and enjoys writing about personal finance, economics, and politics. He previously worked at The Economist in their Audience team.
Daniel studied History at Emmanuel College, Cambridge and specialised in the history of political thought. In his free time, he likes reading, listening to music, and cooking overambitious meals.
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