If you took out car finance between 2007 and 2024, you could be entitled to compensation under the FCA car finance compensation scheme.
The Financial Conduct Authority has confirmed that millions of motorists may have been charged too much because dealers earned hidden commission from lenders.
The average payout is expected to be around £829, although some drivers could receive much more depending on their agreement.
Key points you need to know:
- The scheme covers PCP and Hire Purchase agreements
- Agreements from 6 April 2007 to 1 November 2024 may qualify
- Around 12.1 million finance agreements are included
- The average compensation payment is around £829
- Claims are free and can be made directly to your lender
- The final deadline to complain is expected to be August 2027
What Is the FCA Car Finance Compensation Scheme in 2026?
The FCA car finance compensation scheme is a nationwide redress programme designed to compensate motorists who may have been mis-sold finance agreements.
It covers most Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements arranged through a dealer or broker.
The FCA introduced the scheme after finding that some dealers earned more commission when they persuaded customers to accept a higher interest rate. In many cases, customers were not told that commission was being paid at all.
The scheme covers two separate periods:
| Redress Scheme | Agreement Dates | Why It Is Separate |
| Scheme 1 | 6 April 2007 to 31 March 2014 | This period may face legal challenges because the FCA did not regulate consumer finance until 2014 |
| Scheme 2 | 1 April 2014 to 1 November 2024 | Claims from this period can continue even if earlier agreements are challenged |
The FCA believes millions of drivers should receive compensation during 2026 and 2027.
FCA chief executive Nikhil Rathi said:
“We’ve listened to feedback to make sure the scheme is fair for consumers and proportionate for firms. It will put £7.5bn back into people’s pockets.”
Overall, the scheme is expected to provide significant financial relief to millions of drivers, while holding lenders accountable for past mis-selling practices and ensuring greater transparency in future car finance agreements.
Why Are Millions of UK Drivers Being Offered Car Finance Compensation?
The compensation scheme exists because many drivers were charged more than they should have been when arranging finance for a car, van or motorbike.
When you arranged finance through a dealership, the dealer often worked with one or more lenders. Some lenders allowed dealers to increase the interest rate above the minimum available. The higher the rate, the more commission the dealer earned.
This meant there was a conflict of interest. Instead of finding you the cheapest deal, the dealer may have had a financial incentive to offer a more expensive agreement.
The FCA banned these discretionary commission arrangements in 2021. However, the regulator later concluded that millions of agreements arranged before the ban may have been unfair.
Alex Neill, co-founder of Consumer Voice, said:
“Millions of people were overcharged, and our research shows some were pushed into real financial difficulty.”
That is why the FCA is now requiring lenders to review old agreements and compensate affected customers.
Who Can Claim Under the FCA Car Finance Compensation Scheme?
You may be eligible if your agreement meets a number of key conditions. The scheme is aimed at customers who used dealer-arranged finance and were not properly told about commission arrangements.
You are more likely to qualify if:
- You took out finance between 6 April 2007 and 1 November 2024
- The agreement was for a car, van or motorbike
- You used PCP or Hire Purchase finance
- The finance was arranged through a dealership or broker
- You were not clearly told about the commission being paid
- The agreement involved one of the commission arrangements identified by the FCA
You do not need to still own the vehicle or still be making payments. Even if you finished paying years ago, you could still be entitled to compensation.
The FCA estimates that around 40% of people who took out car finance during the period could qualify.
Which Types of Car Finance Mis-Selling Could Make You Eligible?
If you took out car finance, you could be eligible for compensation if the agreement involved hidden commissions or unfair practices that increased your costs without proper disclosure.
What Is a Discretionary Commission Arrangement (DCA)?
A discretionary commission arrangement allowed the dealer to choose the interest rate you paid within a set range. The higher the rate, the more commission the dealer received from the lender.
For example, if the lender offered finance from 6% to 10%, the dealer could choose to charge you 10% even if you would have qualified for a lower rate. You may never have been told that the extra cost benefited the dealer.
What Is a High Commission Arrangement?
The FCA may also compensate you if the dealer earned an unusually high commission.
Under the final rules, this applies when:
- The dealer received at least 39% of the total cost of credit
- The commission was worth at least 10% of the amount borrowed
- You were not properly told about the arrangement
Some of the most serious cases involve commissions above 50% of the cost of credit. In those cases, you could receive all commission back, plus interest.
What Are Contractual Ties Between Lenders and Dealers?
Some dealerships only offered finance from one lender or gave that lender the first opportunity to provide finance. These arrangements are called contractual ties.
You may qualify if:
- The lender had exclusivity or first refusal
- You were not told about this arrangement
- The arrangement affected your ability to access cheaper finance elsewhere
However, some manufacturer-linked finance deals may not qualify if the relationship between the dealer and lender was already obvious.
How Much Could You Receive from the FCA Car Finance Compensation Scheme?
The average compensation payment is expected to be around £829, including interest. However, your actual payout could be much lower or significantly higher, depending on the type of agreement and how much extra you paid.
Most people are likely to receive somewhere between £300 and £1,500. A smaller number of customers in the most serious cases could receive several thousand pounds.
The FCA says compensation will be based on the amount you lost because of the hidden commission arrangement, rather than offering everyone the same payment.
| Type of Claim | Estimated Compensation |
| Minor overpayment or low commission case | £200–£500 |
| Average qualifying case | Around £829 |
| High commission or severe mis-selling case | £1,500–£3,000+ |
For around 90,000 people whose agreements involved very high commissions, the FCA may require lenders to refund all commission plus interest.
Real Example: A Driver Who Could Receive Compensation
Poppy Whiteside from Kent arranged finance for a Ford Fiesta in 2018. After investigating her agreement, her lender admitted that a discretionary commission arrangement had been used without telling her.
Poppy said she spent months sending letters and chasing updates before finally receiving confirmation that she may qualify.
“They’ve made me jump through hoops. I must have sent seven or eight letters,” she explained.
Her case is similar to many others under the FCA car finance compensation scheme. If your agreement included hidden commission, you could receive a payment even if the finance ended years ago.
How Does the FCA Calculate Car Finance Compensation Payments?
The FCA uses what it calls a “hybrid remedy”. In simple terms, the lender looks at how much more you paid because of the hidden commission and compares it with the commission earned by the dealer.
You may then receive:
- The average of your estimated financial loss and the commission paid
- Interest added on top of that amount
- A higher payment in more serious cases
Interest will generally be calculated at base rate plus 1%, with a minimum of 3%.
The FCA also limits some payouts to stop customers from receiving more than they actually lost.
In around one in three cases, compensation may be capped at:
- 90% of the commission plus interest
- The total cost of credit
- The amount the FCA calculates you would have paid under a fair agreement
For severe cases involving hidden contractual ties and extremely high commission, you could receive all commission plus interest rather than the hybrid amount.
Which Car Finance Agreements Will Not Qualify for Compensation?
Although millions of agreements are covered, not every finance deal between 2007 and 2024 will qualify.
You are less likely to receive compensation if:
- Your agreement was 0% APR
- The commission paid to the dealer was very small
- The dealer did not use the discretionary commission arrangement to increase your rate
- The lender can prove you were told clearly about the commission
- The agreement involved a very high-value luxury or supercar loan
The FCA has also introduced minimum commission thresholds. Agreements with commission below £120 for pre-2014 deals, or below £150 for later agreements, will usually be excluded.
In some manufacturer-linked finance deals, the relationship between the lender and dealer may have been obvious. For example, finance arranged directly through a manufacturer’s own dealership may not automatically qualify.
How Do You Make a Car Finance Compensation Claim in 2026?
The FCA strongly recommends making a complaint yourself rather than waiting for your lender to contact you. Complaining now could help you receive compensation more quickly, especially if you have moved house or no longer have the paperwork.
Step 1: Find Your Finance Details
Try to locate:
- Your finance agreement number
- The name of the lender
- The date the agreement started
- Details of the vehicle
If you no longer have the paperwork, you can often find old agreements through your credit report or by contacting the dealership.
Step 2: Submit a Complaint to the Lender
You should contact the lender directly and explain that you want your agreement reviewed under the FCA car finance compensation scheme.
Include any details you have and ask whether your agreement involved a discretionary commission arrangement, high commission or contractual tie.
Step 3: Wait for the Lender’s Response
The FCA has given lenders fixed deadlines to respond:
| Agreement Period | Lender Response Deadline |
| 1 April 2014 to 1 November 2024 | By the end of June 2026 |
| 6 April 2007 to 31 March 2014 | By the end of August 2026 |
If you have already complained, the lender must contact you within three months of these deadlines.
Martin Lewis has urged consumers to act sooner rather than later:
“The only way to know if you were mis-sold right now is to complain.”
When Will Car Finance Compensation Be Paid and Could Delays Happen?
The FCA hopes that many people will start receiving payments during 2026. Most claims should be completed by the end of 2027.
However, delays remain possible. Several lenders and industry groups are still considering legal action against the FCA’s plans. If legal challenges go ahead, some claims relating to agreements before 2014 could be delayed until 2028.
The FCA created two separate redress schemes specifically to reduce the impact of any court action. That means claims from April 2014 onwards should continue even if earlier agreements are challenged.
Nikhil Rathi has warned firms not to delay payments unnecessarily:
“Payouts should not be delayed any longer, especially as household bills come under greater pressure.”
If you are contacted by your lender and offered compensation, you normally have six months to respond.
What Should You Do Next If You Think You Were Mis-Sold Car Finance?
If you believe your agreement may have involved hidden commission, the best step is to complain directly to the lender now. The process is free, and you do not need a solicitor or claims company.
Claims management companies often take 30% to 33% of your compensation. On an average payout of £829, that could mean losing more than £250 in fees.
If your lender rejects your complaint or offers too little, you can take the matter to the Financial Ombudsman Service at no cost.
The sooner you act, the easier it may be to trace your agreement and make sure you do not miss out on compensation.
FCA Car Finance Compensation Scheme 2026 at a Glance
| Key Detail | Information |
| Average payout | £829 |
| Total compensation expected | £7.5 billion |
| Total industry cost | £9.1 billion |
| Number of agreements covered | 12.1 million |
| Dates included | 6 April 2007 to 1 November 2024 |
| Main finance types covered | PCP and Hire Purchase |
| Common qualifying issues | DCA, high commission, contractual ties |
| Cost of making a claim | Free |
| Final deadline to complain if not contacted | End of August 2027 |
Conclusion
In summary, the FCA car finance compensation scheme could provide millions of UK drivers with refunds for unfairly expensive finance agreements taken out between 2007 and 2024.
If you used PCP or Hire Purchase through a dealer, it is worth checking whether hidden commission affected your deal. Although the average payout is around £829, some claims could be worth much more.
The process is free, and acting sooner may help you receive compensation faster. If you think you were affected, contact your lender before the August 2027 deadline.
FAQs About
Can You Claim Car Finance Compensation If You Lost the Agreement?
Yes. You can often trace old agreements through your credit report, the dealership or the lender. You do not need the original paperwork to make a complaint.
Can You Claim for More Than One Car Finance Agreement?
Yes. If you had several finance agreements between 2007 and 2024, you can complain about each one separately.
Is the FCA Compensation Scheme Free to Use?
Yes. You can complain directly to your lender for free and use the Financial Ombudsman Service if necessary.
Will Using a Solicitor Increase Your Payout?
Not necessarily. The FCA says there is no strong evidence that claims firms secure higher compensation, and they may charge up to a third of your payout.
Can You Still Claim if You Finished Paying Off the Car Years Ago?
Yes. As long as the agreement falls within the qualifying dates, you could still be entitled to compensation even if the loan ended years ago.
What Happens if Your Lender Rejects Your Complaint?
You can ask the Financial Ombudsman Service to review the case. This is free and independent.
Are PCP and Hire Purchase Agreements Both Included?
Yes. Most qualifying claims are expected to come from PCP and Hire Purchase agreements arranged through a dealer or broker.
