The FCA car finance redress scheme is one of the UK’s biggest ever compensation programmes. It relates to the car finance scandal which could have affected millions of drivers. These were mis-sold car finance on account of undisclosed commission and unfair pricing.

You may be able to make a car finance claim and get compensation if you took out car finance from 6 April 2007 and up to 1 November 2024.

Key takeaways: FCA car finance compensation scheme

• Around 12.1 million agreements may be eligible
• Around £7.5 billion in car finance compensation expected
• Around £829 average payout per agreement
• Payouts 2026 expected to begin at scale
• Final deadline for a car finance claim: 31 August 2027
• Covers PCP claims, hire purchase, and broker arranged agreements
• Compensation capped in around 1 in 3 cases

Quick answer: What is the FCA car finance redress scheme?

The FCA car finance redress scheme is a formal compensation process for consumers affected by mis-sold car finance between 2007 and 2024.

It applies where key commission arrangements were not properly disclosed. These arrangements may have influenced the interest rate or overall cost of finance.

The scheme is designed to handle car finance claims at scale and ensure consistent outcomes across millions of agreements.

What caused the car finance scandal?

The car finance scandal centres on how car finance was structured and sold.

The FCA found that some lenders and brokers failed to clearly disclose commission arrangements. Brokers could previously hike up the interest rate to earn a larger commission meaning you could have been overpaying.

This hidden commission will now be compensated with the FCA car finance compensation scheme.

Who can make a car finance claim?

You may be eligible if you entered into a car finance agreement for personal use, including:

• PCP claims and PCP finance agreements
• Hire purchase agreements
• Broker arranged car finance deals

Your agreement may qualify if it involved undisclosed commission or unclear pricing.

What types of mis-sold car finance are covered?

The FCA scheme focuses on specific types of car finance mis-selling.

A relationship is presumed unfair where there was inadequate disclosure of:

• A discretionary commission arrangement, where the broker could adjust interest rates
• A high commission arrangement, at least 39% of total cost of credit and 10% of the loan
• A tied or exclusive lender arrangement, unless clear manufacturer dealer links existed

This means the scheme goes beyond standard complaints and captures a wider range of commission related practices.

Which cases are not covered?

The scheme has clear exclusions and fairness thresholds.

Cases may be treated as fair if:

• Commission was £120 or less before April 2014
• Commission was £150 or less from April 2014 onwards
• The agreement was interest free
• A discretionary commission arrangement was not used
• The lender can show no financial loss or fair disclosure

High value loans are also excluded where the loan amount exceeds 99.5% of loans in that year. These cases can still be pursued separately.

What is the average car finance payout?

The FCA estimates the average car finance compensation is around £829 per agreement [1].

This is an average figure. Your car finance refund will depend on:

• The size of your agreement
• The commission involved
• The interest rate applied
• When your agreement was taken out

Some consumers will receive lower amounts, while others may receive significantly higher compensation.

How much compensation will be paid overall?

The FCA estimates:

• Around £7.5 billion in total compensation
• Around £9.1 billion total cost to firms
• Up to £10 billion if all eligible claims are made

This reflects the scale of the car finance claims landscape.

How is car finance compensation calculated?

Most car finance claims are calculated using a hybrid model.

Hybrid calculation: How it works

Compensation is based on the average of:

• The commission paid
• The estimated financial loss

FCA assumptions

• Around 17% APR adjustment for agreements from April 2014 onwards
• Around 21% APR adjustment for earlier agreements

In a smaller number of cases involving very high commission and additional unfairness, consumers may receive full commission plus interest.

Will you get a full car finance refund or PCP refund?

Most consumers will not receive a full car finance refund.

Full commission repayment is only expected where:

• Commission was extremely high
• Additional unfairness factors were present

Most PCP claims and car finance claims will follow the FCA’s hybrid compensation model.

Are there limits on car finance compensation?

Yes: compensation is capped in many cases.

Redress is limited to the lowest of:

• 90% of commission plus interest
• Adjusted total cost of credit
• Actual total cost of credit

Around 1 in 3 cases are expected to be capped to ensure fair outcomes.

How is interest applied to compensation?

Interest is added to compensation using:

• The Bank of England base rate plus 1%
• A minimum rate of 3% per year

This ensures compensation reflects the financial impact over time.

Key dates: When will payouts 2026 begin?

The FCA has set clear implementation deadlines.

• 30 June 2026: firms must be ready for agreements from April 2014 onwards
• 31 August 2026: firms must be ready for earlier agreements

Payout timeline

• Payouts 2026 expected to begin at scale
• Most compensation paid across 2026 and 2027
• Majority of claims resolved by January 2028

How the FCA car finance scheme works: Step by step

The FCA car finance redress scheme follows a structured process, with clear timelines for firms and consumers.

Step 1: Which agreements are covered

The scheme applies to motor finance agreements taken out between:

• 6 April 2007 and 1 November 2024

This includes most PCP claims and hire purchase agreements for personal use.

Step 2: Implementation period for firms

There is a short preparation period before claims are processed:

• 30 June 2026: for agreements from 1 April 2014 onwards
• 31 August 2026: for agreements before April 2014

Firms must be ready to assess car finance claims and calculate compensation by these dates.

Step 3: What happens if you already complained

If you have already made a car finance claim, or you submit one before the relevant implementation deadline:

• Lenders must respond within 3 months of that deadline
• They will confirm whether you are owed car finance compensation and how much

This means earlier complaints are likely to be processed sooner so better to do a car finance refund check to verify your eligibility.

Step 4: What happens if you have not complained

If you have not submitted a claim:

• Lenders will only contact you if they believe you are owed money
• They have 6 months after the implementation deadline to do this

If you are contacted, you will be invited to take part in the scheme.

Step 5: If you are not contacted

You can still make a car finance claim yourself.

• Final deadline: 31 August 2027

If you do not come forward before this date, you may lose your right to claim.

Step 6: High value loan exclusion

The scheme is designed for the mass market.

• Loans higher than 99.5% of agreements in that year are excluded

If your agreement falls into this category, you can still pursue a claim through other routes, such as the Financial Ombudsman.

When will lenders contact you?

Lenders will contact eligible consumers who are likely to be owed compensation.

• By end of 2026 for newer agreements
• By February 2027 for earlier agreements

If you are not contacted, you can still make a car finance claim.

What is the deadline to make a car finance claim?

The final deadline is:

• 31 August 2027

Missing this deadline may mean losing your right to claim compensation.

What happens if you already made a car finance claim?

If you have already complained, your case will be assessed under the scheme automatically.

You should receive an outcome within 3 months of the end of the relevant implementation period.

What if you have not made a claim yet?

If you have not yet submitted a claim:

• Lenders will only contact you if they believe you are owed money
• They have 6 months after implementation deadlines to do so
• You can still submit your own claim before the deadline

Taking action early may help ensure faster processing.

What does the 31 May 2026 complaint deadline mean?

The FCA previously paused many complaints until 31 May 2026.

• If your complaint falls within the scheme: this date is replaced by scheme timelines
• If outside the scheme: firms must respond within 8 weeks from 1 June 2026

Can you still go to the Financial Ombudsman?

Yes: if you disagree with the outcome, you can refer your case to the Financial Ombudsman Service.

You typically have 6 months from the final decision to escalate.

How is the FCA enforcing the scheme?

The FCA has introduced oversight measures to ensure firms follow the rules.

These include:

• A dedicated supervisory team
• Ombudsman review of scheme decisions
• A joint taskforce with regulators to address poor claims handling
• Action against misleading advertising and unfair practices

What should you do next?

If you had car finance, it is worth checking whether you may be eligible to claim.

The FCA car finance scheme provides a structured way to recover compensation for mis-sold car finance. Acting early can help ensure your claim is assessed promptly.

Frequently Asked Questions

How much is the average car finance payout?

Around £829 per agreement, although individual payouts vary.

When will payouts 2026 begin?

Compensation is expected to begin in 2026, with most claims paid by 2027 [2].

Does this include PCP claims?

Yes: the scheme covers PCP claims, hire purchase, and other car finance agreements.

Can I still make a car finance claim?

Yes: you can submit a claim before the 31 August 2027 deadline.

What is a PCP refund?

A PCP refund refers to compensation for a PCP agreement affected by car finance mis-selling.

Final summary: FCA car finance compensation explained

The FCA car finance redress scheme gives millions of consumers the opportunity to claim compensation for mis-sold car finance.

• £7.5 billion expected in payouts
• £829 average compensation
• 12.1 million agreements in scope
• Payouts 2026 starting point
• 31 August 2027 final deadline

If your agreement involved undisclosed commission or unfair pricing, you may be eligible for car finance compensation or a PCP refund.

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References:

1. The FCA estimates the average car finance compensation is around £829 per agreement - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
2. Compensation is expected to begin in 2026, with most claims paid by 2027 - https://www.fca.org.uk/publication/policy/ps26-3.pdf