The Financial Conduct Authority (FCA) has become embroiled in a stormy row with claims companies over the rising tide of car finance claims. The regulator is about to rein in how claims firms advertise their services, saying most consumers are in danger of being misled [1].  

This follows a series of mis-selling scandals that have hit the UK motor finance industry in recent weeks. Consumer groups and solicitors have claimed that the FCA’s view would wrongly deter people from claiming the compensation they are owed, following a car finance scandal that has already been likened to the scale of the PPI saga.

FCA under fire for its handling of consumer redress

The FCA claims it is determined to allow a fair and transparent compensation scheme but it risks sending out mixed messages. The regulator has confirmed it is launching an advertising drive to alert motorists to duplicitous claims firms. But critics fear it will simply appear as if drivers are being told to steer clear of help, even if it is genuine.

This has raised alarm at a time when public trust in lenders is already low. Surveys suggest only 23% of consumers trust lenders to deliver payouts fairly [2], while finance companies have warned that some customer records are either incomplete, missing, or deleted. This is especially problematic because more than 57% of potential claimants have moved house since their agreements, and over 8 million people no longer have their paperwork.

For critics, the FCA’s messaging undermines its responsibility to protect consumers. With many borrowers confused about their rights, industry experts say drivers should be encouraged to seek guidance, not deterred.

The Supreme Court ruling: unfair relationships under the Consumer Credit Act

The UK Supreme Court ruled on 1 August 2025 that the vast majority of motor finance agreements create an “unfair relationship” under the Consumer Credit Act between lender and borrower [3]. The decision found that hidden commission structures and artificially inflated interest rates left borrowers overpaying and not being made aware of this.

The court ruled that between 2007 and 2021, some 14 million people had been mis-sold car finance, including through Personal Contract Purchase (PCP) claims and Hire Purchase (HP) agreements.

According to the FCA, it expects to pay compensation to millions of mis-sold car finance customers next year, with the average redress estimated at £950 per eligible agreement [4]. Many consumers are already asking: what happens if a company ignores the ombudsman after being ordered to pay compensation?

This uncertainty is driving demand for independent support. More borrowers are seeking the assistance of a finance claims expert to help them overcome the legal and administrative barriers in order to secure money back as a car finance refund which is owed.

FCA’s October consultation and the next steps for drivers

The FCA has confirmed it will open a public consultation in October 2025 [5] to decide how the redress scheme should be structured. It’s understood that the new scheme will work in a similar way to PPI claims. The redress payments will be standardised, and the amounts you can receive will be based on the type of mis-selling.

With record-keeping failures so widespread and a patent conflict of interest, consumer advocates are concerned that many claimants will be unfairly denied compensation. It is therefore essential for drivers to keep informed through reliable channels, like our latest UK car finance claims updates.

Adding to the complexity, financial commentators remain divided. Some argue that motorists should wait for the FCA’s official scheme, while others insist that waiting could be risky. For many drivers, the decision boils down to trust: should you rely on the same lenders accused of mis-selling, or seek independent help now?

Unsurprisingly, many are asking practical questions such as how long does Reclaim247 take to process a claim. The answer varies depending on circumstances, but the company says initial checks can be done in just 60 seconds, without requiring any paperwork or car registration details.

Should you use a claims management company?

As the car finance scandal deepens, millions of drivers are weighing up their options. Waiting for the FCA’s scheme to kick in is an option, but many are concerned that it may be a long time before they get to this stage, due to potential backlogs, record-keeping problems and arbitrary actions by lenders.

It is at this point that dealing with a regulated claims management company might help. FCA-authorised firms like Reclaim247 can take on complicated cases and help drivers who do not have any paperwork, or even recall who their lender was.

For those drivers who prefer to know exactly what they are doing and how it will be done, as well as how quickly, this option may be the most appealing. This is particularly the case for those who are put off or feel overwhelmed by the scale of mis-selling. In working with an experienced finance claims expert, claimants can eliminate avoidable delays and substantially increase their chances of receiving a fair and adequate level of compensation.

Conclusion

The row between the FCA and claims firms regarding commission payments reflects the magnitude of the issues ahead of regulators, lenders and consumers in the wake of one of the largest financial scandals in the UK. The car finance mis-selling claims issue is now firmly in the spotlight, with the Supreme Court confirming widespread wrongdoing and the FCA preparing a redress scheme.

Whether you choose to sit and wait for the compensation process to play out, or take the first step with one of the many reputable finance claims specialists, one thing is for certain: millions of UK motorists are owed justice and billions of pounds of compensation are on the line, so stay informed and be prepared to take action.

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References:

1. The regulator is about to rein in how claims firms advertise their services, saying most consumers are in danger of being misled. - https://www.birminghammail.co.uk/motoring/motoring-news/fca-war-over-1m-ad-32569587
2. only 23% of drivers trust lenders to handle payouts fairly - https://www.slatergordon.co.uk/newsroom/consumers-trust-the-financial-conduct-authority-to-resolve-the-car-finance/
3. The UK Supreme Court ruled on 1 August 2025 that the vast majority of motor finance agreements create an “unfair relationship” under the Consumer Credit Act between lender and borrower. - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
4. the average redress estimated at £950 per eligible agreement - https://www.birminghammail.co.uk/motoring/motoring-news/14-million-drivers-could-receive-32193839
5. The FCA has confirmed it will open a public consultation in October 2025 - https://www.fca.org.uk/news/press-releases/fca-consult-motor-finance-compensation-scheme