The Independent was not involved in the creation of this sponsored content
Millions of UK motorists may be in line for a refund linked to unfair car finance deals that were agreed over the past 17 years, as the Financial Conduct Authority (FCA) gets to grips with a massive potential redress scheme.
The regulators are currently doing a deep dive into the way car dealerships and brokers handled commission payments on car finance deals. If the scheme goes ahead, it could be one of the largest consumer compensation exercises in UK financial history.
But right now, lots of details are still up in the air. The FCA has not decided how any redress scheme would work and whether motorists would get automatic compensation or not.
Mis-Sold Expert notes that additional clarity from the FCA at this stage may assist motorists in understanding their options.
The motor finance commission issue
The FCA is investigating the way that car dealerships and brokers structured the interest rates on car finance deals, known as PCPs and HPs. These are the most common ways to buy a car on finance in the UK.
In particular, they’re looking at the way that dealerships and brokers used to get paid more commission if they sold you a deal with a higher interest rate. The FCA banned these discretionary commission arrangements in 2021 because they caused a conflict of interest and meant that consumers paid more than they needed to.
The FCA believes that a lot of car finance deals done between 2007 and 2024 may be involved, and estimates there could be up to 14 million agreements in total. Industry estimates suggest that the average payout could be around £700 per deal, but the actual payout will depend on many factors, including the size of the loan, the interest rate and how long you had the deal for.
If a redress scheme happens, the total bill for the industry could run into billions of pounds.
In October 2025, the FCA launched a formal investigation to figure out how to make things right. Part of this process was a temporary pause on the usual way that motor finance complaints are handled. This pause will be lifted in May 2026, when firms will go back to dealing with complaints according to the new rules.
Before that, several big motor finance lenders have already started setting aside loads of cash to cover their potential losses.
However, it is not yet clear how the final scheme will apply across lenders, or whether its impact will vary between them.
One thing to watch is whether the scheme will apply to all types of car finance deals and all lenders, or if it will only cover certain deals and certain lenders. If that happens, some people may not get automatic redress and will have to go to their lender to complain.
At the moment, there’s no clear list of who will definitely qualify and who won’t. Mis-sold car finance experts are already advising people who are unsure whether to wait for the scheme to come in or make a complaint now.
You might be affected if:
- You agreed a PCP or HP deal between 2007 and 2024
- You used a dealership or broker to arrange the finance
- You weren’t told that the interest rate could be adjusted to get the dealer a bigger commission
- Your APR was higher than what similar deals were offering at the time
Lots of people don’t know that the interest rate on their car finance deal could be changed to get the dealer a bigger commission. The main problem is that car dealerships didn’t always tell consumers that this was how it worked, and that can form the basis of a complaint.
Each case is different.
For many drivers, the FCA investigation has made them want to take a closer look at their car finance arrangements.
If you’re getting close to the end of a PCP deal, or thinking about settling early or changing cars, you should get a clear picture of your finances. Your settlement figure, any remaining balloon payments and the current valuation of your car can all affect what you do next.
Some people choose to settle early, while others look around for ways to get out of a deal without having to give a car back to a dealership, especially if they think the car’s worth more than the guarantee that’s included in their deal. In situations like that, drivers will often look at independent sales or swap options through a platform like swoppa, to give them an idea of what’s out there before deciding on their next move. Before making any financial decision, it’s also super important to make sure you’re clear on the settlement figures with your lender and what any early termination or exit fees are, that way you don’t get any surprises.
Reviewing your old finance agreement and your current position at the same time gives you a much clearer idea of what you’re getting into, especially at the moment with the FCA still working out the finer details of the redress scheme.
Because the complaint handling pause is due to end on 31st May 2026, things are going to start moving pretty quickly soon.
Once the FCA has finalised the rules, lenders will start working through cases under the new rules. If your agreement is classed as ‘automatic’, you might get some compensation without having to lift a finger.
But if your lender or agreement falls outside those rules, you may need to take action. So, just sitting back and waiting for things to be clearer might mean you’re stuck in limbo for a bit longer than you need to. Understanding where you are right now can help you get ready for what’s coming next.
This whole motor finance review is already being mentioned in the same breath as PPI. It’s likely to have a huge impact.
The FCA believes up to 14 million agreements could be in scope, and if the average compensation is roughly £700 per agreement, that’s a total of around £8 billion across the industry that could be owed back to drivers.
For lenders, the financial impact is going to be detrimental. As for consumers, it’s all about fairness and getting things right.
The interest rates on car finance agreements can make a huge difference over the life of the loan. Even small percentage increases can mean drivers end up paying a lot more cash in the long run, hundreds or even thousands of pounds extra.
The FCA will put out its final decision on the redress scheme before the complaints pause is lifted in May 2026.
Some of the key things to keep an eye on are:
- Which lenders are affected
- Whether people will get their compensation automatically or have to go through the process themselves
- How compensation will be worked out
- Whether there will be any deadlines for drivers to make a claim
For now, people are encouraged to take a look at their agreements, gather up any necessary paperwork and keep an eye on the FCA’s updates.
A note on making a claim
Drivers can contact their lender to raise a complaint, and this is free, thanks to the FCA.
As a claims management company, Mis-Sold Expert helps clients by reviewing the agreement, working out if they’re eligible and then managing the whole claims process for them.
The motor finance redress scheme has the potential to send back billions to drivers who’ve paid more than they should have. The final details of the scheme will decide exactly how that compensation is delivered.
One thing’s for sure, millions of agreements are being looked at, and whatever the outcome is, it will change the way consumer finance works in the UK for a long time to come.
Disclaimer
This article is provided for general information purposes only and reflects publicly available information and regulatory updates at the time of writing. It does not constitute legal, financial, or professional advice.
Car finance agreements and potential eligibility for compensation depend on the specific terms of an individual agreement and the circumstances in which it was arranged. Any potential redress under a future Financial Conduct Authority (FCA) scheme has not yet been finalised and may be subject to eligibility criteria, regulatory decisions, and lender assessments.
You do not need to use a claims management company to make a complaint about car finance. You can contact your lender directly to raise a complaint at no cost. If you are not satisfied with the lender’s response, you may be able to escalate the matter to the Financial Ombudsman Service (FOS), which is free to consumers.
If you are unsure about your situation or require advice about your financial circumstances, you may wish to seek independent legal or financial advice before taking action.
Current status of the proposed redress schemeCould some drivers miss out?How do you know if you’ve been affected?Reviewing your current finance positionWhy the timing is all a bit criticalThe scale of the issueWhat’s going to happen next?