But the scheme isn’t final until later this month.
The Financial Conduct Authority has confirmed it will publish its final decision in late March after reviewing more than 1,000 responses to its consultation on motor finance mis-selling.
The proposals relate to historic commission arrangements that may have left motorists overpaying on car loans.
Consumer champion Martin Lewis said the update from the regulator provides important clarity on timing and what happens next.
The Financial Conduct Authority (FCA) confirmed it expects to publish its final rules outside market hours — “roughly 5pm one evening” in late March.
Lewis explained: “Then there’ll be a three-month implementation period (five months for older agreements).
“For those who’ve already complained you’ll be told your compensation within three months of that, asked if you want to accept it, then paid. That should happen by the end of 2026.”
News: Car Finance Redress Scheme
The regulator @TheFCA has put out an update this morning. It says it will announce the scheme at roughly 5pm one evening late March. Then there’ll be a 3mth implementation period (5mths for older agreements).
For those who’ve already complained…
— Martin Lewis (@MartinSLewis) March 4, 2026
The Financial Conduct Authority (FCA) said it is likely to make several changes to its proposed scheme after receiving more than 1,000 consultation responses.
If the scheme is approved:
- Lenders would have three months to implement payouts
- Older agreements could allow up to five months
- Consumers would be notified within three months of that period ending
- Drivers could accept compensation immediately
The regulator said: “Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026.”
What is the motor finance mis-selling scandal?
The controversy centres on commission paid by lenders to car dealers — particularly discretionary commission arrangements (DCAs), which were banned in 2021.
Under these models, dealers could increase a customer’s interest rate and receive higher commission in return. The FCA has previously said this meant many motorists:
- Were not properly informed about commission
- Could not negotiate effectively
- May have paid higher interest rates
The watchdog estimates around 14 million agreements could be in scope, with average compensation of roughly £700 per customer.
Total costs to lenders – including administration – could reach £11 billion.
“A victory for common sense”
Alex Neill, co-founder of Consumer Voice, welcomed the proposal to automatically include drivers who have already complained.
She says: “It’s a victory for common sense that drivers who have already complained about motor finance will be automatically included in the scheme and receive a prompt offer of compensation.”
However, she warned further changes are needed: “We are calling on the FCA to automatically include all other affected consumers through an opt-out approach and increase the compensation and compensatory interest levels to accurately reflect the true level of harm.”
Neill also cautioned that allowing lenders more time to process older cases must not disadvantage customers.
Dan Coatsworth, head of markets at AJ Bell, said payouts may come at a crucial moment for households: “Millions of people hoping for a cash windfall from motor finance mis-selling compensation might find the money lands just in time to deal with a big increase in the cost of living.”
With energy prices rising again in recent days, he added: “If the energy shock is sustained and household bills soar, a compensation-related windfall might help to ease that pain.”
He noted that major lenders including Barclays, Lloyds Banking Group and Close Brothers have already set aside significant sums to cover potential payouts.
How has the industry responded?
Some lenders have voiced concerns over the scale of the scheme.
Santander UK previously warned that the proposals could affect the wider car finance market. Its former chief executive Mike Regnier last year called for Government intervention, cautioning that the compensation bill could impact jobs and the motor sector more broadly.
The FCA said proposed refinements aim to:
- Deliver a “better experience for consumers”
- Keep implementation costs proportionate
- Support a well-functioning market
“A sensible acknowledgement” of the scale
Richard Pinch, senior director at Broadstone, described the proposed implementation timeline as realistic.
“Firms will need time to review historic agreements, build out operational processes and ensure payments are calculated accurately, particularly where older agreements are involved,” he explains.
Meanwhile, Shanika Amarasekara, chief executive of the Finance & Leasing Association, said compensation should be focused only on customers who “actually lost out”.
What should motorists do now?
The FCA is advising motorists who believe they were mis-sold a car finance agreement with hidden commission to complain now to their lender.
However, it stressed: “There is no need to use a claims management company (CMC) or law firm, and those who do may lose over 30% of any compensation.”
If the scheme proceeds, firms would proactively identify and contact eligible customers.
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What happens next?
The final decision will be announced in late March.
If approved, 2026 could see millions of drivers receiving compensation — potentially just as households continue grappling with rising living costs.
For now, consumers are urged to:
- Check past car finance agreements
- Submit complaints directly to lenders if concerned
- Avoid paying unnecessary claims fees
A landmark redress scheme may be approaching, but the final green light is still weeks away.