A number of banks are objecting to a standard approach to sorting out complaints over car finance as the Financial Conduct Authority (FCA) plans a mass redress scheme. A number of banks could end up having to pay millions of pounds in compensation to motorists who have been potentially mis-sold car finance on an unfair commission basis. A deadline for responses to the proposal has been missed by some of the lenders, but several of the industry’s trade associations have raised their concerns that the approach will lead to uncertainty for lenders and unfair levels of exposure.

This article reflects the increasing friction between lenders and the regulator. The industry is under the spotlight again after years of grumbling about the practice of hidden commissions and over-inflated loan costs. Now that the FCA is using tougher language, it seems both lenders and customers will be closely watching its next moves.

Why Are Banks Criticising the Redress Scheme?

Banks and motor finance firms have lobbied the FCA against its planned redress model [1] for customers potentially overcharged on car loans and PCP agreements. Lenders argue the scope and methodology of the scheme could produce arbitrary results, and that it does not take into account the current financial pressures on the industry.

Central to the debate are questions around how and on what basis payouts will be calculated, and who will be eligible for a payout. The FCA proposal only applies to deals made since 2007, so there are thousands of cases that could be reopened. However, there have been questions about how fair it is to reopen cases that have been previously agreed and decided and whether it is practicable to reopen cases on old deals particularly ones where there have been fixed commission agreements that rewarded the broker for arranging a loan with a higher rate of interest.

Banks have said that the proposed framework creates a "costly" precedent. Consumer groups have said that consumers are entitled to compensation for years of opaque and unfair practices. The regulator is finalising its consultation, with the final decision to be published in 2025.

Understanding the FCA’s Consultation and What It Covers

The FCA launched its formal consultation on 7 October 2025 [2] to address widespread consumer complaints regarding car and PCP claims. The proposed redress scheme would cover motor finance agreements taken out between 6 April 2007 and 1 November 2024, a period during which many customers unknowingly paid higher interest rates because of commission-linked sales.

According to the regulator’s estimates, people could receive around £700 per agreement on average [3], depending on the terms of their finance contracts. The FCA expects to pay compensation to millions of mis-sold car finance customers next year, a move that could become one of the largest consumer redress programmes in UK financial history.

Under the consultation, customers who believe they were affected by commission-based mis-selling will have several options. They can wait for the FCA’s industry-wide redress scheme to begin, complain directly to their lender, or escalate their case to the Financial Ombudsman Service, all of which are free to do. This structure mirrors the approach taken during the PPI scandal, which became a landmark in consumer financial justice.

Campaigners have advised car finance scandal customers to be patient but persistent as this continues to play out over the coming months and years. It is thought by some industry analysts that the eventual decision made by the FCA will provide a steer as to how financial redress should be handled in the post-PPI world, weighing up consumer fairness and the economic realities of the lending industry. So, if you are looking for the latest information on UK car finance claims, it seems that the next 12 months will be particularly significant in determining both the claims process and future industry standards.

What Should You Do Now?

The FCA has now proposed an industry-wide compensation scheme for unfair car finance agreements between April 2007 and November 2024, with average payouts expected to be around £700 per agreement. You can still choose to complain directly to your lender, go to the Financial Ombudsman Service, or wait for the FCA’s redress scheme, expected to begin in 2026, all of which are free to do.

If you have already made a complaint, you will be one of the first to be contacted when the FCA scheme opens. Lenders will only be contacting customers they are able to trace [4]. If you have moved or changed contact details, please make sure your details are correct. By taking action now, your case will be logged and ready for assessment when the scheme opens, which may mean you receive your payout quicker when the scheme does open.

Frustrated motorists may be wondering how long does a PCP claim take. Unfortunately, there is still no set time frame as yet, but the expectation is that once live, the average claim could take a number of months to process, depending on the complexity and number of claims. Consumers may also be asking when is the PCP payout or how long do car finance claims take to pay out, but this will differ, dependent on what the FCA’s final redress model will look like.

If you haven’t yet started a claim, Reclaim247 offers tools to help trace your finance history and submit a complaint using just your name, address, and date of birth. Their service involves no paperwork, no upfront fees, and operates on a no-win, no-fee basis, giving customers an easy way to ensure they’re not overlooked in the redress process.

Should You Consider a Claims Management Company?

With the FCA set to finalise its scheme, consumers considering car finance mis-selling claims are starting to seek help and advice from trusted firms. You can make a complaint on your own, but many drivers choose the best car finance claim company to manage the paperwork, gather the evidence, and talk to lenders for you. This can be helpful if you have several agreements or missing paperwork.

Engaging with an experienced finance claims expert means your case will be properly prepared and compliant with FCA processes. It also means they can explain to you if your agreement involved a fixed commission arrangement or any of the other practices which could mean you are eligible for compensation. As with any financial service, it’s sensible for consumers to check the company they are using is authorised and clear about its fees.

If you want to find out more about car finance refund, it can be useful to have professional assistance, particularly as more information is announced following the FCA’s consultation. Companies such as Reclaim247 are able to help drivers who want to make sure that their complaint is submitted correctly and monitored from the beginning.

Are you currently partway through the complaints process, or have you only recently learned about your rights to make a claim? Either way you must stay up to speed. This could be a watershed moment for consumers and you don’t want to be left out in the cold when the payments start flowing. For a clearer overview of your rights and next steps, visit Reclaim247’s latest update on PCP claims to understand how the redress process will likely unfold.

For consumers wondering how long does Reclaim247 take, processing times vary based on the lender’s response and the availability of agreement records, but early action can significantly reduce waiting times once the FCA scheme goes live.

Looking Ahead

The FCA's redress scheme has divided opinion in the financial industry, but has been hailed by campaigners as a landmark moment for consumers. The regulator has not been afraid to make lenders foot the bill for years of murky commission structures.

With the consultation period about to end, impacted drivers are advised to collect their paperwork, verify their contact information and choose if they want to submit a complaint themselves or through an agent. Next year will decide not just the level of compensation but also the bar for what's considered fair in auto financing.

In the meantime, though, the advice on all of this remains the same: keep up-to-date, act quickly, and make a note of every communication you have with your claims provider over your claim. The FCA’s scheme will likely continue to evolve, and with significant sums in potential refunds, 2026 could mark a turning point for British consumers affected by mis-sold car finance.

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References:

1. Banks and motor finance firms have lobbied the FCA against its planned redress model - https://uk.finance.yahoo.com/news/why-banks-criticising-car-finance-143036576.html
2. The FCA launched its formal consultation on 7 October 2025 - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
3. £700 per agreement on average - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
4. Lenders will only be contacting customers they are able to trace - https://www.kslaw.com/news-and-insights/motor-finance-litigation-moves-up-a-gear-with-fca-plan