Compensation on car loans to UK motorists for mis-sold car finance will continue in 2026. The Financial Conduct Authority (FCA) has confirmed the process could start as soon as next year [1]. The UK’s financial watchdog had to respond after the Supreme Court’s judgement [2] this year, which found that millions of UK drivers had been mis-sold their car finance agreements. The regulator is now expected to consult on the structure of a compensation programme, with the lenders being expected to face billions of pounds in liabilities. The FCA programme is expected to be one of the largest in terms of customer redress in recent years.

The Supreme Court recently handed down a judgement that around 14 million people were mis-sold car finance between 2007 and 2021. Only 23% of people trust lenders to handle payouts fairly [3] and lenders are already saying some records are missing or deleted. That matters, because 57% of potential claimants have moved house since their finance deal, and over 8 million have lost paperwork. For many consumers, the only way to secure a fair outcome will be through structured car finance claims rather than relying on lenders alone.

FCA states that up to 14 million car loans may meet compensation criteria

The FCA estimates there may be as many as 14 million car loans eligible for redress [4]. The scale of mis-selling around hidden commissions and extra interest rates is why others have called this a car finance scandal. While payouts will vary, reports suggest that the average car finance refund involving discretionary commission arrangements is likely to be around £950 per agreement [5], with some claimants entitled to significantly more.

The FCA has made clear that the scheme will not involve every loan written during the period. Rather, it will be limited to cases in which it is possible to demonstrate the presence of such practices, for example, discretionary commission schemes. It is hoped that this filtering will enable an appropriate compromise to be found between equity for consumers and soundness for the credit industry.

The FCA looks into 30 million car finance deals for compensation scheme

The FCA has begun analysing 30 million car finance agreements [6] to establish which are covered by the new redress scheme. The regulator has said it will work through the details "painstakingly" to ensure no consumer who is owed redress is missed. This will involve cross-checking the individual loan agreements with commission structures and sales practices in place at the time the loans were agreed.

For motorists and households who are already under pressure from the cost of living, it will at least be a relief to know that the regulator is listening and taking action on longstanding complaints. But this is about timing. The FCA intends to begin making payouts next year. However, that is when the administrative process of dealing with millions of PCP claims starts.

UK watchdog warns car finance firms over ‘lost’ data amid £18bn compensation scheme

One of the FCA’s biggest challenges is to ensure lenders are complying with requests for records. The regulator said some providers were claiming that key records had been “lost” or deleted, which could “act as a barrier” to consumers being able to prove their case. The FCA has issued a stern warning that firms cannot use lost data as a blanket excuse to avoid their responsibilities [7].

The cost of the compensation scheme has been estimated at up to £18bn, making it one of the UK’s biggest consumer redress schemes ever since PPI. If you have been affected, it highlights the importance of keeping up to date with the latest news about car finance claims in the UK so that you don’t miss out on any refunds you are due.

Should you consider using a claims management company?

Some money experts advise sitting tight and waiting for the official redress scheme to launch. This may not be the best option for everyone. But if you have changed address, lost paperwork or do not trust your lender to process claims fairly, and if you do not know who your lender was, cannot find the paperwork or want an expert to fight for you, then you may want to think about using a claims management company.

For instance, Reclaim247 offers support by handling the entire process on a no win, no fee basis. All that’s needed is your name, address, and date of birth: no paperwork or car registration required. The company is an FCA-authorised service and as all claims are managed by solicitors it offers a trusted claims route for those seeking car loan refund.

Final thoughts

The growing car finance scandal is threatening to undermine confidence in the UK lending industry. As many as 14 million people who use car finance could be in line for a refund and the FCA is pressing ahead with plans to launch a redress scheme next year. If you're one of the motorists hit by the penalty, you should take notice. Whether you decide to sit tight and await the regulator's scheme or instead hand the matter over to a car finance claims expert to work on your behalf, the process must be managed effectively.

For many, the prospect of finally securing justice offers hope after years of unfair lending practices. As the regulator tightens oversight and lenders prepare for billions in payouts, the next 12 months will be pivotal in restoring fairness and accountability in the UK car finance market.

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1. The Financial Conduct Authority (FCA) has confirmed the process could start as soon as next year - https://www.bbc.com/news/articles/c5y8xpxp3r6o
2. Supreme Court’s judgement - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
3. Only 23% of people trust lenders to handle payouts fairly - https://www.slatergordon.co.uk/newsroom/consumers-trust-the-financial-conduct-authority-to-resolve-the-car-finance/
4. The FCA estimates there may be as many as 14 million car loans eligible for redress - https://www.ft.com/content/ed45913c-4e45-4e76-aa0b-010ba707b4c4
5. car finance refund involving discretionary commission arrangements is likely to be around £950 per agreement - https://www.birminghammail.co.uk/motoring/motoring-news/14-million-drivers-could-receive-32193839
6. The FCA has begun analysing 30 million car finance agreements - https://www.reuters.com/business/finance/uk-watchdog-examines-30-million-car-finance-deals-compensation-scheme-2025-09-09/
7. The FCA has issued a stern warning that firms cannot use lost data as a blanket excuse to avoid their responsibilities - https://www.theguardian.com/business/2025/sep/09/fca-car-finance-firms-compensation-scheme-car-loans