LONDON — Britain’s financial regulator will set out its approach to a multi-billion-pound response to the car finance scandal after markets close on March 30 [1], with millions of motorists potentially eligible for compensation.

The Financial Conduct Authority said it will publish details of its motor finance redress scheme after 4:30 p.m. to limit market disruption [2], as lenders prepare for a wave of car finance claims linked to long-running car finance mis-selling.

Regulator confirms timing of key announcement

FCA Chief Executive Nikhil Rathi told lawmakers the regulator would outline its plan shortly after trading ends [3], reflecting the scale and sensitivity of one of the UK’s largest financial mis-selling cases.

The update is expected to provide clarity on how firms must handle car finance claims and PCP claims, following months of consultation with the industry.

Mis-sold car finance under scrutiny

The car finance scandal involves failures to adequately disclose commission structures between lenders and dealerships. Later on, it was revealed that these structures may have incentivised brokers to charge their customers with higher interest on loans between 2007 and 2024, including personal contract purchase agreements.

This has led to millions of potential car finance claims, with affected drivers seeking car finance compensation after being overcharged.

Multi-billion-pound compensation plan

The FCA previously outlined proposals that could see around £11 billion returned to consumers through a redress scheme [4]. However, total costs could fluctuate depending on how many drivers come forward with a car finance claim or PCP claim.

Current estimates suggest individual payouts may remain below £950 in many cases, although the final amount of any car finance refund or PCP refund will depend on the extent of overpayment.

The first payouts 2026 are expected to begin later this year, with further details on timing likely to be confirmed alongside the regulator’s announcement.

Industry warns of legal and financial fallout

Banks and lenders, including major high street institutions and specialist finance providers, have raised concerns about the proposed scheme. Some have warned that the FCA’s definition of unfair lending and thresholds for excessive commissions could lead to legal challenges.

There are also concerns that the scale of compensation could place significant strain on the sector, particularly if claims volumes are higher than expected.

Lenders increase provisions amid uncertainty

Banks and building societies are bracing themselves for the bill. Lloyds Banking Group has already earmarked nearly £2 billion [5], while Close Brothers Motor Finance has set aside hundreds of millions of pounds [6], and announced plans to shrink its workforce over the next few years [7]. It has been a rollercoaster ride for the shares of lenders since they have warned about the likely cost of redress.

Possible changes to final scheme

The FCA has indicated it may refine its approach based on feedback gathered during consultation. Rathi said the regulator remains open to adjusting elements of the scheme if evidence suggests changes are needed.

The regulator is also balancing consumer protection with broader economic considerations, as the government has called for a more growth-friendly regulatory environment.

What drivers should expect next

Motorists who believe they were affected by mis-sold car finance are expected to be able to submit a car finance claim or PCP claim once the scheme is finalised. Many have already conducted a car finance refund check to know if they are eligible.

Successful applicants could receive a car finance refund as part of a wider compensation process, with lenders likely required to contact eligible customers directly.

Landmark moment for car finance compensation

The FCA’s forthcoming announcement is expected to mark a turning point in the car finance scandal, setting out how billions in car finance compensation will be distributed.

For millions of drivers, the update could determine how and when they receive redress, as the industry prepares for one of the most significant compensation exercises in recent UK financial history.

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References:

1. Britain’s financial regulator will set out its approach to a multi-billion-pound response to the car finance scandal after markets close on March 30 - https://www.reuters.com/sustainability/boards-policy-regulation/britains-fca-publish-motor-finance-redress-plan-march-30-2026-03-24/ 
2. The Financial Conduct Authority said it will publish details of its motor finance redress scheme after 4:30 p.m. to limit market disruption - https://www.fca.org.uk/news/statements/timing-fca-motor-finance-announcement
3. FCA Chief Executive Nikhil Rathi told lawmakers the regulator would outline its plan shortly after trading ends - https://www.globalbankingandfinance.com/britains-fca-publish-motor-finance-redress-plan-march-30/ 
4. The FCA previously outlined proposals that could see around £11 billion returned to consumers through a redress scheme - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
5. Lloyds Banking Group has already earmarked nearly £2 billion - https://www.thebanker.com/content/29f463e3-f509-4ca6-8f90-1d1873541f05
6. Close Brothers Motor Finance has set aside hundreds of millions of pounds - https://cardealermagazine.co.uk/motor-finance-scandal-bites-hard-as-close-brothers-loses-122-4m-with-additional-33m-car-loan-blow/318920
7. announced plans to shrink its workforce over the next few years - https://www.theguardian.com/business/2026/mar/17/close-brothers-banking-group-cut-jobs-car-finance-shares