Tensions are intensifying between lenders, regulators and industry stakeholders as the UK prepares for a surge in car finance claims linked to the ongoing car finance scandal, with potential payouts 2026 expected to reach up to £11bn [1]. The Financial Conduct Authority (FCA) will reveal details of its plans to update its redress scheme on 30 March after market close [2]. The announcement is set to have a major impact on the future of car finance compensation and millions of customers.

The proposed framework could affect millions of agreements, including PCP claims, raising the prospect of significant car finance compensation, car finance refunds and PCP refunds for affected consumers.

Banks signal challenges over redress design

A number of large lenders are anticipated to appeal aspects of the FCA’s approach [3], in particular around how car finance compensation will be calculated and who is eligible for a car finance claim. The industry’s concern has been around whether the scheme is treating fairly those where the customer suffered an obvious financial loss and those where the outcome is less clear cut.

The key question is whether all consumers affected by mis-sold car finance should automatically receive a payment, or if payment should be based on an assessment that the consumer was financially disadvantaged by the mis-sale. This issue is especially pertinent to PCP claims where the deals can be very different from each other. Firms want clarity on this point but the FCA has said that it is aiming for consistent and fair outcomes across the market.

Concerns over eligibility and fairness

Consumer advocates and industry observers have highlighted a key concern: some borrowers who paid more overall may not qualify under the proposed model [4]. The FCA’s methodology focuses on specific indicators of harm, which could mean that not all higher-cost agreements result in a car finance refund.

This raises the possibility of inconsistent outcomes, where some consumers receive car finance compensation while others in similar financial positions do not. The issue is especially relevant for PCP refund cases, where total costs can be influenced by balloon payments and variable interest rates.

Ensuring fairness across all car finance claims remains a central challenge as the regulator finalises its approach.

Growing volume of claims activity

Public awareness of the car finance scandal is growing by the day and with it car finance claims and PCP claims as consumers are looking back on previous agreements. Lawyers and claims specialists in the industry are assisting individuals to gain a better understanding of what options are available to them and if they are entitled to a car finance refund or claim.

Awareness is growing of the car finance scandal, with people increasingly looking at car finance claims and PCP claims as they review previous agreements. Those within the industry including legal and finance claims experts are supporting individuals with determining if they are eligible for a car finance claim or refund.

Further growth in claims activity is expected following the FCA’s March 30 announcement, as clearer guidance emerges on eligibility and compensation calculations.

Key moment ahead of payouts 2026

The FCA’s next announcement will be a watershed in the road map to payouts 2026, setting out how billions in car finance compensation will be paid and how soon consumers can expect to receive a car finance refund or PCP refund.

In the coming months, for car owners who already proceeded with a car finance fund check, it will be crucial in setting out whether or not they are entitled to a claim for car finance mis-selling, and how the scheme works for them individually.

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References:

1. potential payouts 2026 expected to reach up to £11bn - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
2. The Financial Conduct Authority (FCA) will reveal details of its plans to update its redress scheme on 30 March after market close - https://www.fca.org.uk/news/statements/timing-fca-motor-finance-announcement
3. A number of large lenders are anticipated to appeal aspects of the FCA’s approach - https://www.ft.com/content/328bda7e-ae89-454f-a53b-c8e974a32a99?syn-25a6b1a6=1 
4. some borrowers who paid more overall may not qualify under the proposed model - https://consumervoice.uk/cars/fca-car-finance-redress-scheme-could-exclude-borrowers-who-paid-more-overall/