Updated: 20 October 2025

Originally Published: 09 October 2024

What the FCA Redress Scheme Covers (2025 Update)

The Financial Conduct Authority (FCA) has proposed a national redress scheme for car finance agreements made between 6 April 2007 and 1 November 2024 where undisclosed or unfair commissions were paid [1]. It mainly applies to Personal Contract Purchase (PCP) and Hire Purchase (HP) deals.

The scheme employs a hybrid calculation method that adds commission values to overpaid interest to give an average payout of about £700 per agreement [2]. Final rules are due in early 2026, and compensation payments later that year, with the FCA consultation closing on 18 November 2025.

Introduction

Across the UK, millions of drivers have discovered that their car finance agreements were not as fair as they seemed. Many were charged higher interest rates or hidden fees without being told why. Others were not informed that their dealer earned extra commission by increasing their rate. These cases are now known collectively as mis-sold car finance.

The Financial Conduct Authority (FCA) is investigating how these deals were arranged and many drivers may be owed compensation. Should this apply to you, then the next question is simple: should you make a car finance claim yourself, or work with a finance claims expert or claims management company that can handle the process for you?

This guide explains your options, how the FCA redress scheme works and whether using a PCP claims company or another professional service could help you.

Why Car Finance Claims Are Rising

For more than a decade, PCP and HP finance made it easier for people to buy new cars. On the surface, these agreements looked flexible and affordable. In practice, many were structured around discretionary commission arrangements (DCAs).

Under a DCA, the dealer could increase the customer’s interest rate and earn a higher commission as a result. The key issue is that most customers were never told this was happening. That lack of transparency meant millions paid more than they should have.

The FCA banned discretionary commissions in January 2021 [3], saying they created a conflict of interest between dealers and customers. But the damage had already been done. Agreements signed before the ban are now under review, and car finance claims have risen sharply since the FCA investigation began.

Other common problems include hidden admin charges, balloon payments that were poorly explained, and pressure to sign without understanding the contract. These are all now central to the FCA’s ongoing review into mis-sold car finance.

What Has Changed in 2025

The year 2025 has been a turning point for UK car finance compensation. Three developments have shaped what happens next.

1. The Supreme Court ruling

The Supreme Court ruling in August 2025 [4] confirmed that secret commission payments are not automatically unlawful, but setting them too high can still be unfair under the Consumer Credit Act 1974. This decision means drivers can still challenge mis-sold car finance where commissions were hidden or excessive.

2. FCA complaint handling extension

The FCA is consulting on moving the deadline by which lenders must make final response to motor finance complaints to 31 July 2026. This will give lenders more time to prepare for consistent decision-making when the redress scheme comes in. This extension isn't applicable to car leasing complaints, however. Lend leasing firms must begin issuing final responses from 5 December 2025 [5].

3. FCA redress scheme consultation

In October 2025, the FCA opened a six-week consultation setting out how redress will be calculated and distributed. It covers regulated car finance agreements between April 2007 and November 2024 and proposes a hybrid compensation model combining overpaid interest with commission.

The FCA expects around 85 per cent of eligible consumers to participate, with an estimated £8.2 billion in total redress and £11 billion in overall costs including administration [6]. Final rules are expected in early 2026, with payments beginning later that year.

For consumers, the message is clear. Preparing your complaint now gives you the best chance of being among the first to receive compensation when the FCA scheme begins.

Your Options for Making a Car Finance Claim

If you believe your car finance deal was mis-sold, there are three main ways you can take action. 

1. Work with a Regulated Claims Management Company

An FCA-authorised claims management company (CMC) deals with claims for customers.

Best for: Most standard PCP or HP claims

Cost: Usually around 36% of your compensation (including VAT), only payable if your claim succeeds

Why this works for many people: No upfront fees, the process is fully managed for you and you get specialist knowledge of car finance cases.

Choosing a PCP claims company is often the simplest route. That means no more paperwork, deadlines or negotiations; experienced professionals take care of that.

2. Instruct a Solicitor or Legal Firm

The Solicitors Regulation Authority (SRA) oversees the regulation of solicitors [7]. In matters that are more complicated or contentious, they might offer official legal assistance.

Best for: Complex, high-value, or defended claims

Cost: About 36% of the compensation, including VAT, and sometimes with extra legal costs

Why this might be right for you: You'll have legal advice and representation if your case is technical or high stakes.

A solicitor can be a sensible option if your claim is unusual or involves very large sums of money.

3. Handle the Claim Yourself (DIY)

Some people choose to make their own complaint directly to the lender without outside help.

Best for: Straightforward, recent agreements

Cost: Free

Things to consider: You’ll need to gather the evidence, complete the paperwork, and deal with any responses or resistance from the lender yourself.

Doing it yourself can be effective in simple cases. But if the lender pushes back or the case becomes complicated, many find it stressful to manage alone.

Why Work With a Finance Claims Expert?

Making a car finance claim isn’t always as simple as sending in a form. An experienced finance expert can make a real difference in the outcome. They know where problems hide and how to build a strong case on your behalf.

CMCs like Reclaim247 can:

• Track down lost or archived agreements, even if your lender says they no longer exist
• Spot multiple issues within the same contract, such as hidden commissions or mis-sold insurance
• Push back if you’re offered a low settlement
• Take care of the paperwork and deadlines so you don’t have to

It's evident from the more than 500,000 claims that have already been filed through Reclaim247 that many clients feel more secure knowing that they have professional assistance behind them.

Public Trust in the FCA

Confidence in the FCA remains strong. According to a 2025 survey, 62 per cent of drivers said they trust the FCA to manage the car finance compensation scheme fairly, compared with just 19 per cent who trust lenders [8]. This trust reflects growing awareness that an independent process is the fairest route to redress.

How Much Compensation Could You Receive

The FCA’s consultation estimates that average payments will be around £700 per agreement, although some consumers could receive much more depending on the size of the loan and the commission involved.

In a small number of serious cases, where commissions made up over 50 per cent of the total cost of credit and more than 22.5 per cent of the loan, the FCA proposes full commission recovery plus interest.

Typical compensation may include:

• A refund of overpaid interest
• Repayment of undisclosed commissions
• Refund of unfair fees or charges
• Interest on refunded amounts at the Bank of England base rate plus one percentage point
• Corrections to your credit report if mis-selling caused financial harm

How to Make a Claim

Even though the FCA has paused final complaint responses until 4 December 2025, you can still log your complaint now.

Check your documents for hidden commissions, unclear fees, or unexplained interest rate increases.

Ask your lender for copies if you no longer have the paperwork. They must supply it upon request.

Write to your lender explaining why you believe the car finance was mis-sold. Include your documents and any relevant correspondence.

If your lender does not respond or rejects your complaint, you can take your case to the Financial Ombudsman Service once the pause ends.

Many consumers choose to work with a claims management company or finance claims expert to ensure everything is complete and ready for review when the FCA scheme launches in 2026.

Frequently Asked Questions

Can I claim if my car finance has already ended?

Yes. Agreements from 2007 to 2024 can qualify if they were mis-sold.

What is the average payout?

The FCA expects the average payout to be around £700 per agreement.

How long will it take?

Most cases will move forward after December 2025, with payments beginning later in 2026.

Do I need my paperwork?

No. Finance claims experts or claims management companies can often recover it from your lender.

Can I still complain now?

Yes. Filing now ensures your case is logged ahead of the FCA redress scheme.

Who regulates claims companies?

Claims management companies are authorised and regulated by the Financial Conduct Authority (FCA).

Final Word

The UK car finance scandal has exposed how easily customers were misled about interest rates, commissions, and fees. The upcoming FCA redress scheme is designed to correct those mistakes and restore fairness across the industry.

With average payouts of around £700 per agreement, now is the ideal time to check your paperwork and start your complaint. You can submit a car finance claim directly, or you can work with a finance claims expert, PCP claims company, or claims management company who can manage it all on your behalf.

Consumer rights are there to protect you. Knowing those rights, and using them, is the best way to reclaim what you are owed and move forward with confidence.

__________

References:

1. The Financial Conduct Authority (FCA) has proposed a national redress scheme for car finance agreements made between 6 April 2007 and 1 November 2024 where undisclosed or unfair commissions were paid - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
2. average payout of about £700 per agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
3. The FCA banned discretionary commissions in January 2021 - https://www.fca.org.uk/publication/consultation/cp24-15.pdf 
4. The Supreme Court ruling in August 2025 - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
5. Lend leasing firms must begin issuing final responses from 5 December 2025 - https://www.fca.org.uk/news/statements/firms-given-until-december-2025-respond-motor-finance-commission-complaints
6. The FCA expects around 85 per cent of eligible consumers to participate, with an estimated £8.2 billion in total redress and £11 billion in overall costs including administration - 
7. The Solicitors Regulation Authority (SRA) oversees the regulation of solicitors - https://www.sra.org.uk/
8. According to a 2025 survey, 62 per cent of drivers said they trust the FCA to manage the car finance compensation scheme fairly, compared with just 19 per cent who trust lenders - https://www.slatergordon.co.uk/newsroom/consumers-trust-the-financial-conduct-authority-to-resolve-the-car-finance/