The Financial Conduct Authority has confirmed it will set out the redress scheme after the markets close on Monday, March 30.
The Financial Conduct Authority has confirmed it will set out the redress scheme after the markets close on Monday, March 30.(Image: Getty Images/iStockphoto)
The Financial Conduct Authority (FCA) has confirmed it will set out its approach on motor finance redress shortly after markets close on Monday, March 30, according to a new update on the City watchdog’s website. An estimated 14 million people are due a share of the estimated £8.2 billion compensation payout, some £700 per mis-sold agreement.
Earlier this month the FCA announced that millions of people with motor finance commission mis-selling claims will receive compensation in 2026. The City watchdog has previously said it is likely to make several changes to the proposed compensation scheme after receiving more than 1,000 responses to its consultation on the plans.
The redress scheme is expected to give lenders a three-month implementation period to pay out compensation, with up to five months for older motor finance agreements.
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People could be told within three months of the end of the implementation period whether they are owed compensation and how much, but could then accept immediately without waiting for a final determination.
Earlier this month, the FCA said: “Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026.”
In October last year, the FCA announced around 14 million people across the UK may be due compensation payouts averaging £700 as a result of hidden commission on motor finance deals agreed between April 2007 and November 2024.
The City watchdog added: “Our advice remains that anyone concerned they weren’t told about commission involved in their motor finance deal should complain now.
“Doing so means they should get any compensation sooner. There is no need to use a claims management company (CMC) or law firm, and those who do may lose over 30 per cent of any compensation.”
The likely changes to the scheme were supported by many consumer groups and firms that responded to our consultation. As well as providing a better experience for consumers, the changes would help keep the cost of delivering the scheme proportionate, supporting a well-functioning market for the millions of people that rely on it.
FCA streamlined compensation process for consumers and firms
- People who complain before the scheme starts would no longer be asked if they wish to opt out. Instead, within 3 months of the end of the implementation period, their lender would tell them whether they’re owed compensation, and how much.
- Consumers receiving a redress offer would be able to accept it immediately, rather than waiting for a final determination.
- Firms would not be required to write to customers via recorded delivery. We would allow a range of channels that best meet consumers’ needs with appropriate safeguards to prevent fraud.
Car finance mis-selling in a nutshell
An estimated 14 million people are due a share of the estimated £8.2 billion compensation payout, some £700 per mis-sold agreement.
Martin Lewis has been at the forefront of raising awareness about the mis-selling and says there are three ways people who purchased a vehicle through HP or PCP may have been mis-sold.
These are:
- Discretionary Commission Arrangements (DCAs) – 11.2m agreements
- Contractual ties – 3.2m agreements
- Unfairly high commission – 2.9m agreements
Martin has also explained each of these categories on MoneySavngExpert.com (MSE.com).