Giving evidence to MPs on the Treasury Committee, Nikhil Rathi, chief executive of the FCA, said details of the scheme were still being worked through, such as whether claimants would need to opt-in or be included automatically.
“It will be pragmatic, proportionate and fair to all sides,” he said.
The FCA said claimants were likely to get less than £950 per deal.
Following the recent court cases, those eligible are likely to include:
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Many of the 14.6 million agreements under so-called discretionary commission arrangements, in which the dealer received a commission from the lender based on the interest rate charged to the customer
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Other car buyers who had an unfair contract because the commission paid to the dealer was so high
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Buyers who were not given accurate information about getting the best finance deal
However, Mr Rathi said not all motor finance firms involved were being cooperative with the regulator as it planned the compensation scheme.
He was pressed by the committee chair, Dame Meg Hillier, on exactly which firms were “playing hardball”, but they are yet to be named.