The Financial Conduct Authority has confirmed a major compensation scheme for drivers affected by the car finance scandal.

Policy Statement PS26/3 sets out how firms must return money to consumers [1] who were impacted by mis-sold car finance, including PCP claims and hire purchase agreements.

This guide explains who can make a car finance claim, how much compensation may be available, and what the key deadlines mean in practice.

What is FCA PS26/3?

FCA PS26/3 is the regulator’s final decision to introduce a formal redress scheme for car finance mis-selling.

The FCA identified widespread failures in how motor finance was sold. Many consumers were not given clear information about commission arrangements that could influence the interest rate they were offered.

As a result, some customers paid more than they should have over the life of their agreement.

The scheme has been designed to deliver car finance compensation at scale, in a consistent and structured way, rather than relying only on individual complaints.

Quick summary: FCA car finance redress scheme

• Around £9.1 billion total industry cost
• Around £7.5 billion expected in consumer payouts
• Around 12.1 million agreements affected
• Around £829 average payout per agreement
• Payouts expected across 2026 and 2027
• Final deadline to claim is 31 August 2027

This makes it one of the largest consumer redress schemes in UK financial services.

How big is the car finance compensation scheme?

The scale of the scheme reflects the widespread nature of car finance mis-selling.

• Around £9.1 billion total industry cost at estimated uptake
• Around £7.5 billion expected to be paid directly to consumers
• Around £1.6 billion in operational costs

If every eligible agreement were included, total redress liabilities could reach around £10 billion [2].

These figures underline the scale of the car finance scandal and its impact across millions of consumers.

How many agreements are affected?

The FCA estimates that around 12.1 million agreements fall within scope of the scheme.

This estimate is based on full uptake across both scheme periods.

As a result, car finance claims represent one of the largest consumer compensation exercises ever carried out in the UK.

What is the average payout for a car finance claim?

The FCA estimates that the average redress per agreement is around £829 [3].

This is not a fixed amount. It is an average based on modelling across millions of agreements.

Your individual car finance payout will depend on:

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

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

Who can make a car finance claim?

You may be eligible to make a car finance claim if you had:

• A PCP claim or PCP finance agreement
• A hire purchase agreement
• A broker arranged car finance deal

The scheme covers agreements only taken out for personal use vehicles.

If you were not informed of commission or had unclear pricing in your agreement this may be classed as car finance mis-selling and you could be entitled to a payout.

The two redress schemes explained

The FCA has divided the scheme into two periods.

Scheme 1

• Agreements from 6 April 2007 to 31 March 2014
• Assumed uptake around 72%

Scheme 2

• Agreements from 1 April 2014 to 1 November 2024
• Assumed uptake around 76%

The overall scheme assumes a weighted uptake of around 75% [4].

Earlier agreements are treated as potentially causing greater consumer harm.

Key deadlines and implementation timeline

The FCA has introduced a structured implementation period so firms can prepare to operate the scheme.

• 30 June 2026: Firms must be ready for agreements from 1 April 2014 onwards
• 31 August 2026: Firms must be ready for agreements taken out before April 2014

These dates mark when firms must begin actively processing car finance claims and issuing compensation.

When will payouts happen?

Most car finance payouts are expected across 2026 and 2027.

The year 2026 is expected to mark the start of large scale compensation as firms begin operating the scheme.

Final deadline to make a claim

The final deadline for consumers to submit a car finance claim is:

• 31 August 2027

If you miss this deadline, you may lose your right to claim car finance compensation.

How the scheme affects existing car finance complaints

The FCA previously paused many complaints relating to car finance mis-selling, including discretionary commission cases.

Firms were given extra time to respond, with a deadline of 31 May 2026.

If your complaint is covered by the scheme

If your complaint relates to issues included in the redress scheme, such as undisclosed commission, the 31 May 2026 deadline will no longer apply.

Instead, your complaint will be assessed under the scheme rules and timelines.

If your complaint is not covered by the scheme

Some complaints fall outside the scope of the scheme, including certain agreements after 1 November 2024.

For these cases:

• The complaint pause ends on 31 May 2026
• Firms must respond within 8 weeks from 1 June 2026
• The timeframe may be shorter depending on time already elapsed before the pause

Complaints with multiple issues

Where complaints include multiple issues, such as commission and affordability, firms may delay responding to non scheme elements until they can provide a combined outcome.

How car finance compensation is calculated

The FCA uses a hybrid redress model for most car finance claims.

This means compensation is not simply a full refund of commission.

The hybrid model

Compensation is calculated using an average of:

• Estimated loss using an adjusted interest rate
• Commission paid plus interest

Key assumptions

• Around 17% APR adjustment for later agreements
• Around 21% APR adjustment for earlier agreements

This approach is designed to balance fairness with consistency across millions of claims.

Will you receive a full PCP refund?

In most cases, you should not expect a full PCP refund or full commission repayment.

Full commission repayment is only likely in cases that closely match the legal judgment in Johnson [5].

Most PCP claims and car finance claims will be assessed using the hybrid model.

Are there limits on compensation?

Yes. The FCA applies caps to ensure outcomes remain proportionate.

Compensation is limited to the lowest of:

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

How interest is applied

Interest is calculated using simple interest.

The FCA applies a minimum rate of 3% per year, even during periods of low base rates.

How long does a car finance claim take?

Once the scheme is operational:

• Firms are expected to respond within around 3 months for new claims
• Consumers have 1 month to respond to provisional decisions
• Consumers have 6 months to accept or escalate to the Financial Ombudsman
• Payments must be made within 1 month of acceptance

What role do lenders and brokers play?

Lenders are responsible for assessing claims and paying compensation.

If your agreement has been sold, the original lender will usually remain responsible if they are still active.

Brokers must provide supporting information within 1 month when requested.

What if your documents are missing?

Firms can reconstruct missing data where necessary.

They may contact both consumers and third parties to confirm key details.

Can you go to the Financial Ombudsman?

Yes.

If you are not satisfied with the outcome of your car finance claim, you can refer it to the Financial Ombudsman Service within 6 months.

What this means for the car finance scandal

PS26/3 confirms that the FCA has identified widespread issues across the motor finance market.

Car finance mis-selling, particularly involving undisclosed commission, has affected millions of consumers.

This scheme is designed to return money to affected drivers in a structured and consistent way.

What should you do now?

If you had a car finance agreement, it is worth checking whether you may be eligible to claim through a car finance refund check.

You do not need to wait to be contacted.

Whether you are exploring PCP claims, a car finance refund, or general car finance compensation, understanding your position early can help you take action.

Frequently Asked Questions

How much is the average car finance payout?

The FCA estimates the average car finance compensation at around £829 per agreement. The actual amount you receive will depend on your individual agreement.

When will car finance payouts start?

Payouts are expected to begin in 2026, once firms complete the implementation phase, and will continue into 2027.

What is the deadline to make a car finance claim?

The final deadline to submit a claim is 31 August 2027. Missing this deadline may mean losing your right to compensation.

Do I need to have already complained?

No. You can still submit a claim even if you have not previously complained. You do not need to wait to be contacted.

Will I get a full refund of commission?

In most cases, no. Most claims will be calculated using the FCA’s hybrid model rather than full commission repayment.

Does this apply to PCP claims?

Yes. The scheme includes PCP claims, as well as other forms of car finance such as hire purchase agreements.

Final thoughts

FCA PS26/3 is a major development in the car finance claims landscape.

• Around £9.1 billion total impact
• Around £7.5 billion in consumer payouts
• Around £829 average payout per agreement
• Millions of eligible agreements

With payouts 2026 expected, this is a key moment for anyone affected by mis-sold car finance.

_________

References:

1. Policy Statement PS26/3 sets out how firms must return money to consumers - https://www.fca.org.uk/publication/policy/ps26-3.pdf
2. If every eligible agreement were included, total redress liabilities could reach around £10 billion -https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme 
3. The FCA estimates that the average redress per agreement is around £829 - https://www.bbc.com/news/live/czx94evl5lrt
4. The overall scheme assumes a weighted uptake of around 75% - https://www.dailymail.co.uk/money/cars/article-15691403/FCA-says-12MILLION-829-payouts-car-finance-compensation.html
5. legal judgment in Johnson - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf