Updated: 08 April 2026

Originally Published: 31 May 2025

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A Market Defining Shift for UK Drivers

Mis-selling of car finance is no longer an emerging issue. In 2026, it is set to become one of the UK’s largest consumer redress events to date. The FCA has now confirmed the final framework under PS26/3, creating an official redress scheme for millions of drivers that may have been treated unfairly when taking out finance [1] (including personal contract purchase agreements, hire purchase agreements and similar products) between April 2007 and November 2024.

The scale is substantial. The FCA now estimates average car finance compensation at £829 per agreement, up from £695 previously, with total payouts 2026 expected to reach around £7.5 billion [2]. Millions of consumers are now within scope.

For many, the question is no longer whether mis-selling happened. The real question is whether their own agreement qualifies, and what they should do next.

What Is Mis-Sold Car Finance?

Mis-sold car finance is an agreement that was not set out or explained fairly, transparently or with full information at the point of sale.

Typically, in reality the vast majority of issues have related to how finance was organised, not with the actual product. Customers were often left in the dark about the way a deal worked, what they were actually paying for and how any third party incentives might have affected the result.

Mis-sold car finance is really all about transparency. Whether it’s customers not being aware that a dealer or broker was on commission, or not being told that this could have affected the interest rate they were offered, or simply being offered a ‘lender choice’ with no real choice of lenders.

These issues sit at the centre of most mis-sold car finance claims today, particularly in PCP claims where the structure of the agreement can make costs harder to understand.

If you want to assess your own situation in more detail, you can start with this guide.

Why This Became a Nationwide Issue

Car finance became the dominant way to purchase vehicles in the UK over the past two decades. PCP and hire purchase agreements made cars more accessible, but they also introduced complexity.

Behind the scenes, lenders often paid commission to dealers or brokers for arranging finance. In some cases, those intermediaries had the ability to influence the interest rate offered to the customer. This created a conflict of interest that was not always explained.

The FCA banned discretionary commission arrangements in 2021 [3], recognising that they could not be managed fairly. However, millions of agreements had already been written under earlier rules. The regulator’s focus has now shifted to addressing the impact of those historic practices.

FCA PS26/3: What Has Changed in 2026

Publication of PS26/3 signals shift from investigation to implementation

The FCA has now confirmed how mis-sold car finance claims will be assessed, how compensation will be calculated and how the process will work across the industry. This will help to remove much of the uncertainty that has existed in 2025.

One of the most important updates is the revised estimate of compensation. When it first proposed the changes, the FCA suggested an average payout of £695 per agreement. After further refinements to the methodology, this has now risen to £829.

The majority of consumers will be awarded a sum made up of a mixture of the financial disadvantage that they have suffered, plus the amount of commission paid. Interest will be added on to this figure. The method of calculation will vary, depending on the type of case and the scheme under which your agreement falls.

The Two Scheme Structure Explained

The FCA has split the redress scheme into two, to help manage the scale and complexity.

The first scheme applies to agreements taken out between 6 April 2007 and 31 March 2014. The second scheme applies to agreements taken out between 1 April 2014 and 1 November 2024.

This split is significant, as it has an impact on both timing and redress amount. On average, earlier agreements are at £734 per claim, while later agreements average at £881. The difference in these two averages reflects differences in the assessment of financial disadvantage and commission in the two periods.

The Three Types of Mis-Selling the FCA Is Targeting

The FCA’s framework focuses on three main types of unfairness, and your outcome will depend on which category your agreement falls into.

The most common involves discretionary commission arrangements. These allowed dealers or brokers to increase your interest rate in order to earn more commission. It created an obvious conflict of interest with the seller directly benefiting from charging you more. The average pay-out for these claims is expected to be about £810.

The second main group is what are known as contractual tie cases. Here the lender was given a priority or exclusivity that restricted your ability to shop around. These cases typically result in compensation averaging around £807, although some may be excluded where lender relationships were clearly visible.

The third category involves high commission cases. These arise where commission levels were particularly large, usually at least 39 percent of the total cost of credit and 10 percent of the amount borrowed. These cases tend to result in higher redress, with average payouts around £1,203.

For further insight into how commission structures affected consumers, see this article.

How Compensation Is Calculated

The approach of the FCA car finance payout is designed to restore fairness after the car finance scandal, rather than create a financial windfall.

Compensation typically includes the financial disadvantage caused by the agreement and the commission paid, with interest added to reflect the time that has passed.

Interest is calculated using the annual average Bank of England base rate plus 1 percent, with a minimum of 3 percent applied each year. This means the final car finance refund may be higher than the base calculation alone.

In some cases, compensation will be capped to ensure that consumers are not placed in a better position than they would have been in if the agreement had been fair.

Who Is Likely to Be Eligible

Eligibility is based on you not being told important information when you agreed to the contract.

If you entered into a PCP or hire purchase agreement during the specified period you could be eligible if you weren’t made aware of how commission was paid, lender relationships or how your rate was calculated.

The car does not need to be yours anymore and your agreement does not need to be open. We base our eligibility on how your agreement was set up originally.

There are some exclusions. Agreements with minimal commission, typically below £120 or £150 depending on timing, are not included. Some contractual tie cases may also fall outside the scheme where the relationship between lender and dealer was clearly visible.

To understand the wider impact on your financial profile, see this article.

Timeline: When Will Payouts Happen?

The FCA has now set a clear timetable for complaints and compensation.

For agreements from April 2014 onwards, the scheme begins on 30 June 2026. Consumers who submit complaints before this date should receive responses by 30 September 2026.

For agreements before April 2014, the scheme begins on 31 August 2026, with responses expected by 30 November 2026 for early complaints.

Consumers who do not complain may still be contacted by lenders, but this will happen later. The final deadline to make a claim is 31 August 2027.

In practice, many payouts 2026 are expected to begin within months of these milestones, with further payments continuing into 2027.

How to Claim Mis-Sold Car Finance

There are three main routes available, and each has its place depending on your situation.

You can complain to your lender yourself. This is free and you have total control. However you will need to obtain information and manage the process yourself.

You can also use finance claims experts or a PCP claims company. They can make the process much easier, especially if you have several agreements or limited paperwork. They mostly work on a no win no fee basis. Make sure you understand if there are any fees.

A third option is to pursue the matter through the courts. This route can be more complex and may involve legal costs, so it is typically reserved for more disputed or complex cases.

For most consumers, the FCA redress scheme remains the most straightforward path to a car finance claim.

How Long Does a Claim Take?

When you can expect to hear back depends on when you make your claim.

If you complain before the scheme launch dates, you're likely to receive a response quicker. If you delay making a claim you will still get money back, it may just take longer.

Find out more on this blog.

The Role of PCP Claims in the Wider Picture

Claims against PCP deals make up the largest percentage of car finance claims.

PCP deals tend to have more complex terms and are more dependent on the explanation of the deal when sold. Commission, balloon payments and lender relationships all affect this.

You could be awarded a PCP refund on a successful claim. PCP claims are just one element of car finance compensation.

Key Takeaways: What You Need to Know

Car finance mis-selling has now been defined as a regulatory issue. The FCA have confirmed how they will be running the redress schemes via PS26/3.

The average payout for car finance mis-selling has risen to £829. This is based on the new way of calculating payouts including; financial disadvantage, commission and interest. Naturally, your payout will vary depending on your individual circumstances and the type of case you have. For example, if you have a high commission case, the percentage increases which equates to a significantly higher payout.

There are two schemes which will cover agreements made between 2007 and 2024. They currently have different windows for responses and payouts. We expect a lot of customers to receive payouts throughout 2026.

You do not have to wait to hear from someone. If you make a complaint now your case could be actioned quicker and you could receive payment sooner.

If you were ever sold a car finance agreement with unclear commission rates, limited choice of lenders or your interest rate was higher than you should have received then you could be eligible.

What This Means for You

The car finance redress scheme has now been fully outlined. We have rules, set deadlines and expect compensation payments to be made throughout 2026.

If you think you might have had your agreement mis-sold, the next step is to do a car finance refund check to know if you’re eligible to make a complaint.

Drivers can check using Reclaim247 to see if they could have a valid claim and what to do next. We’re here to make it simple and keep things as transparent for you as we can.

Check you’re eligible today and begin the process of claiming your car finance refund.

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References:

1. The FCA has now confirmed the final framework under PS26/3, creating an official redress scheme for millions of drivers that may have been treated unfairly when taking out finance - https://www.fca.org.uk/publication/policy/ps26-3.pdf
2. The FCA now estimates average car finance compensation at £829 per agreement, up from £695 previously, with total payouts 2026 expected to reach around £7.5 billion - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
3. The FCA banned discretionary commission arrangements in 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models