Latest Updates on Car Finance Claims in the UK (2026)
Updated: 07 April 2026
Originally Published: 30 June 2025
FCA Car Finance Compensation Update, Redress Scheme, and What It Means for Drivers
Latest Update (April 2026)
The Financial Conduct Authority has issued its final position in the FCA car finance scandal after PS26/3 was released in March 2026 [1].
Uncertainty over, finally you can take action. The regulator has set up a redress scheme, explained how car finance compensation will be calculated and set out a timetable for when the car finance claims process will take place over the next two years.
A key update is the deadline of 31 August 2027 for consumers who do not hear from their lender but still wish to opt in.
The FCA also expects the first wave of payouts 2026 to take place from late 2026 [2], with further payments 2027 and 2028 depending on the timing of when claims are assessed.
What Is the FCA Car Finance Scandal?
The FCA car finance scandal is the collective issues found with the way motor finance agreements have been sold in the UK for several years.
The problem at the heart of the scandal is the way commission was paid between lenders and dealerships. Dealers were often paid commission to arrange finance, and in many cases this affected the interest rate the customer was given.
The big issue is this was not made clear to most consumers. The majority of customers were not told:
- That commission was being paid
- That it affected the cost of borrowing
- How their rate was calculated
As a result, some drivers may have overpaid without realising and there have been millions of claims for mis-sold car finance as a result, including hundreds of thousands of PCP claims and potential PCP refunds.
What Has Changed Since 2025?
We have reached this point after a long journey with many milestones along the way.
One such milestone was the FCA banning discretionary commission in 2021 [3]. In doing so they accepted there was a risk of consumer detriment.
Another landmark was the Supreme Court decision in August 2025 [4] on the motor finance cases. This was key to the finding that commission itself is not unfair, but disclosure gives rise to unfair relationships.
In March 2026 the FCA announced a full redress scheme in PS26/3. This is currently the largest update to car finance compensation.
The measures announced above have all contributed to progressing the car finance mis-selling situation towards something more than just investigation.
The Legal Foundation: Supreme Court Decision
The August 2025 Supreme Court judgement is a landmark in the FCA world of car finance. The Court ruled on a number of cases that all involved lenders including Close Brothers and MotoNovo. The Supreme Court decided that the mere fact that a commission is paid does not make an agreement unfair automatically:
Rather it is all about transparency. The Court stated unequivocally that:
- Consumers must have been given clear information
- The way the agreement was explained matters
- Each car finance claim must be assessed on its own facts
In one case, a large undisclosed commission combined with poor explanation led to a finding of an unfair relationship.
This ruling didn’t automatically grant consumers the right to a car finance refund. However, it did give the legal basis for the FCA’s redress scheme.
How does the FCA Redress Scheme work?
In March 2026, the FCA published details of the official car finance compensation scheme. This was one part of their wider response to the scandal. The compensation scheme will be able to handle claims both fairly and at scale for millions of agreements.
It covers regulated motor finance agreements entered into between: 6 April 2007 and 1 November 2024
To help with volume and complexity, the FCA has divided the scheme into two:
- Scheme 1: agreements entered into from 2007 to 31 March 2014
- Scheme 2: agreements entered into from 1 April 2014 to 1 November 2024
The split should allow more recent cases to be dealt with more quickly, as well as dealing with older agreements.
Who Actually Pays Compensation?
It’s lenders who have to pay compensation on the FCA car finance scheme, not dealerships.
Because your finance agreement is with the lender, not the dealer/broker that may have arranged it for you.
It’s an important point, because even if your dealership went out of business or was sold, you can still have your car finance claim reviewed by the lender.
What Made Many Agreements Potentially Unfair?
The FCA has concluded that there were three key features of how car finance was sold which led to mis-selling.
The first was discretionary commission arrangements. These allowed dealers discretion over the interest rate applied, within a predetermined range. The higher the rate, the higher the dealer’s commission would be. Many customers were unaware of this practice occurring.
The second practice was high commission levels. In some cases, a large proportion of the cost of credit element was commission. This was not always explained to customers.
Thirdly, limited or restricted lender panels were used. Some dealers gave the impression of the broker-shopping around for the customer when in fact there were limited lenders to choose from.
Together, these three features created an environment where consumers were frequently unaware of how their finance agreement was priced.
Who Is Eligible for Car Finance Compensation?
You may be eligible to claim car finance compensation if you were sold a deal with unfair or unclear information.
If you were not informed of commission being paid, did not understand how your rate was calculated or were not provided with an explanation of your options at the outset you may be owed a payout.
Importantly, you can still make a car finance claim even if:
- You no longer have the car
- You do not have the paperwork
- The agreement was taken out many years ago
The FCA expects lenders to rely on their own records when assessing claims. A car finance refund check can help you understand whether your agreement may fall within scope.
When Will Car Finance Payouts Happen?
Timing is one of the most common questions we’ve seen from consumers asking about the FCA car finance scheme.
If you’ve already claimed, your timescale will depend on whether your agreement is classified as a new or old scheme agreement.
For newer agreements, we expect most decisions to be made by September 2026. Payments for 2026 claims will follow shortly after.
For older agreements, decisions may take a few months longer. You can expect claims to be paid into early 2027.
If you are a consumer who hasn’t claimed yet, we anticipate that most decisions and payments will be made throughout 2027 and into 2028.
Can Compensation Be Paid Earlier?
In theory, yes.
The FCA has said there is nothing to prevent lenders from issuing compensation payments when they are ready to do so.
However, it's likely that the majority of firms will want to use the implementation period to get systems in place, validate data and work through claim volumes.
Which means that although there may be some early payments, the majority of car finance payouts are likely to happen within the timescales outlined in the scheme.
Full FCA Scheme Timeline Explained
The FCA has provided detailed timelines for how the scheme will operate. These timelines differ depending on whether you have already made a car finance claim.
If you have already complained
For agreements from 2014 onwards, firms are expected to issue decisions by September 2026, with payments following shortly after.
For earlier agreements, decisions are expected by November 2026, with payments likely in early 2027.
If you have not yet complained
If you have not yet submitted a claim, your lender may contact you between late 2026 and early 2027.
You will then be given a period to opt into the scheme.
Final decisions for these claims are expected during 2027, with payments continuing into late 2027 and early 2028.
Car Finance Claims Deadline
If you have not heard from your lender, you can make a car finance claim by: 31 August 2027
This is the final opportunity to join the FCA redress scheme. After this date you may no longer be eligible.
How Car Finance Compensation Is Calculated
The FCA told lenders how refunds should be calculated in car finance deals. They wanted millions of agreements to be treated consistently but also fairly.
Customers will normally receive a refund that's part calculated on the estimated financial loss caused by the interest rate and part on the commission paid on the agreement.
The actual car finance refund will usually be half of these two figures averaged together, plus interest.
There are also differences between the two schemes:
- Scheme 1 average is estimated at around £734
- Scheme 2 average is estimated at around £881
The exact amount depends on your agreement and how it was structured.
In addition, compensation will include interest based on the Bank of England base rate, plus 1 percent. The FCA has also confirmed a minimum interest floor in some cases.
It is important to note that compensation is designed to return you to the position you would have been in if treated fairly. It is not intended to provide a financial gain beyond that.
In some cases, this means compensation may be capped.
Not All Agreements Will Qualify
While the FCA car finance scheme is wide in scope, not every agreement will result in compensation.
The FCA has refined its eligibility criteria, reducing the number of agreements expected to qualify from earlier estimates.
For example:
- Low commission deals may be out of scope
- Executed agreements where the relationship between lender and dealer is obvious may also be out of scope
- Lenders will be allowed to contest claims they believe were adequately disclosed
The latest estimate is that 12.1 million agreements are in scope, less than previously estimated.
This is because the scheme has been refined to focus on consumers who were unfairly treated.
Your Options: FCA Scheme, CMC Support, or Court Action
At this point, most consumers realistically have three options with their car finance claim.
Option 1: Make a claim through the FCA redress scheme. It’s designed to be straightforward to use and the FCA has stated that the scheme is free to use. You can make a complaint yourself without paying for support.
Option 2: Work with a claims management company or finance claims expert. Companies like this can help support you with your claim if you want help preparing it, understanding if you’re eligible or contacting lenders.
Option 3: Take legal action via the courts. In some cases, this could lead to you getting a higher amount of compensation. However you may have to pay legal fees and could take longer.
Should You Use a Claims Management Company?
You don't have to use a claims management company to make a car finance claim, and most people don't.
If you're not sure if you're entitled to claim or you have multiple agreements you'd like to claim on, using a finance claims expert could help.
They can also support you throughout the process if you'd like assistance. The majority of CMCs work on a No Win, No Fee basis.
Make sure you use a firm who is authorised and regulated.
PCP Claims and PCP Refunds Explained
PCP stands for Personal Contract Purchase and is a type of car finance claim. PCP deals can be complicated with balloon payments and mileage clauses. The majority of PCP claims involve hidden commission or insufficient explanation of the deal. These occasions can result in a PCP refund through the FCA scheme.
Should You Start a Car Finance Claim Now?
Yes, in the majority of circumstances.
The FCA and consumer experts have said that the sooner you submit a car finance claim, the better.
This is because if you raise a complaint before the end of the implementation period, your claim has the best chance of being looked at sooner and being part of the first batch of compensation rulings.
If you delay there’s still a chance you’ll qualify but your claim may be considered later on.
Taking action now also eliminates the risk of missing future deadlines, such as the 31 August 2027 deadline.
For many, the easiest first step is running a car finance refund check.
The FCA Car Finance Scandal Timeline
A timeline can be useful to see how we got here and where we go from here. The FCA car finance scandal has changed quite a bit over the last few years. Here is a brief timeline of legal and regulatory changes that have brought us to today’s redress scheme.
Industry Timeline: What Happened
- 2007 to 2021 - Discretionary commission arrangements widely used across the UK car finance market
- 28 January 2021 - The FCA bans discretionary commission arrangements due to concerns about unfair pricing
- October 2024 - The Court of Appeal rules in favour of consumers in key car finance cases
- April 2025 - The Supreme Court hears appeals involving lenders such as Close Brothers and MotoNovo
- 1 August 2025 - The Supreme Court clarifies how unfair relationships should be assessed
- October 2025 - The FCA opens a consultation on a proposed redress scheme [6]
- December 2025 - The FCA confirms complaint handling timelines and publishes updated guidance [7]
- March 2026 - The FCA confirms the final redress scheme in PS26/3
Consumer Timeline: What Happens Next
What happens from here depends on whether you have already submitted a car finance claim.
If you have already complained
- 31 May 2026 - Complaint handling resumes
- June to September 2026 - Many decisions issued for newer agreements
- Late 2026 - First payouts 2026 begin
- By 30 November 2026 - Decisions issued for older agreements
- Early 2027 - Further payments made
If you have not yet submitted a claim
- Late 2026 to early 2027 - Lenders begin contacting eligible customers
- 2027 - Opt in process for the FCA redress scheme
- By 31 August 2027 - Final car finance claims deadline if you are not contacted
- Late 2027 to early 2028 - Final decisions and payments
Why This Timeline Matters
The timeline shows that the FCA car finance scandal is no longer at the investigation stage. It is now moving into large-scale resolution.
For consumers, the key takeaway is simple. The process is time-bound, and there are now clear stages for when decisions and car finance compensation will be issued.
Frequently Asked Questions About FCA Car Finance Claims
What is the FCA car finance scandal?
The FCA car finance scandal is the widespread mis-selling of car finance agreements over many years, in particular where commission was payable but not explained. To put it simply, dealers would receive commission from lenders for arranging finance, sometimes affecting the interest rate you were offered.
The problem isn’t that there was commission involved, it’s that many consumers were never made aware of how it worked, and how it impacted the cost of their agreement. That lack of transparency is what has led to millions of car finance claims being reviewed today.
Am I eligible for car finance compensation?
You could be eligible for car finance compensation if certain parts of your agreement weren't explained when taking it out. Whether there was a commission not explained to you, you were given a higher interest rate than you were told or even if the whole deal wasn't explained.
Keep in mind this will be depended on your agreement. Obviously not everyone will be eligible but a lot of people will be surprised to learn that it could still apply to them. Which is why many people begin with a car finance refund check, using only their basic details.
Is there a car finance claims deadline?
Yes, a key deadline has been introduced for FCA car finance claims. However, this only applies if your lender hasn’t contacted you.
You’ll need to make a claim by 31 August 2027 if you want to be part of the scheme.
If you’ve already claimed, or your lender gets in touch with you, you’ll fall under different deadlines. That’s why the usual advice is not to wait. Submitting sooner removes any guesswork around deadlines.
When will car finance payouts happen?
How long you can expect to wait to receive your car finance compensation will depend on where your claim is in the process. If you've already made a claim, you could expect to hear back by late 2026 if it's for a newer agreement. Some payments could be made in 2026 in these circumstances as well.
If your agreement is older, decisions and payments are likely to be made in early 2027. If you haven’t made a claim yet, your claim could be looked at later. Any payouts are likely to be paid out into 2027 and perhaps even into early 2028.
How much compensation could I receive?
The FCA has given us an estimate to give you a ballpark idea. It is only an indication.
The average person will likely be looking at refunds of between £700 and £829 per agreement. But this will vary significantly from person to person depending on your circumstances.
Things like the size of the loan, how the commission was structured, how much your interest rate was increased by, how long the agreement was for will all affect the outcome. In some cases where disclosure was particularly poor, you could be entitled to more.
Do I need paperwork to make a car finance claim?
No, this is a concern that is commonly overstated.
The FCA has instructed lenders to use their own records for car finance claims. Basically, you don't need any documentation to start a claim.
Sometimes just basic information like the vehicle, ballpark dates, or even just the lender can be enough to start. Often times very little information is required to complete a car finance refund check.
What is a PCP claim?
PCP stands for Personal Contract Purchase agreement. It is the UK’s most popular type of car finance.
PCP claims are a bit more complex than other loan claims. That’s because these agreements allow you to pay a deposit, make monthly payments – then make a final balloon payment if you wish to own the car.
Due to this structure, some information isn’t always laid out clearly. Many claims we see now are based on undisclosed commission or hidden pricing which could mean your agreement is eligible for a PCP refund through the FCA scheme.
Can I still claim if I no longer have the car?
Yes, and this is a common misunderstanding.
Your eligibility is based on the finance agreement itself, not whether you still own the vehicle. Many successful car finance claims relate to agreements that ended years ago, where the car has already been sold, traded in, or returned.
What if the dealership has closed down?
The fact they have gone bust doesn't mean you can't make a claim.
You have an agreement with the lender, not the dealership. Even if the dealer is bust, the lender still has an obligation to investigate your car finance claim and determine whether car finance compensation is due.
Should I use a claims management company?
You do not need to use a claims management company to make a claim. It is possible to make a car finance claim yourself for free.
However some people like to have the back up of a finance claims expert. They can assist if you're not sure you're eligible, have multiple agreements or simply want help with the process.
If you decide to do this, ensure you use an authorised and regulated firm.
Will every car finance claim result in compensation?
Not every claim will receive a payout
The FCA have stressed that claims will be assessed on a case-by-case basis. Some agreements may fall out of scope. For example if commission was low, or if pricing was clearly explained and competitive when taken out.
However, millions of agreements will be in scope, which is why the redress scheme has been created.
Is it better to wait before making a claim?
Waiting almost never benefits you.
By making a car finance claim today you can guarantee your claim is recorded and will be actioned as the scheme evolves. It also eliminates any risk of delay and helps ensure you don’t miss the 31 August 2027 deadline.
Completing a simple car finance refund check is the quickest way to get started for most people.
What is the difference between the FCA scheme and going to court?
The FCA scheme provides a simple and standardised approach to car finance claims so consumers can get compensation without going to court. Calculations are standardised and will apply to millions of agreements.
Court action is a different process. It may give you a different result. But it can also cost money, take longer and be much less certain. For most people the FCA scheme will be the simplest solution.
Final Thoughts
The FCA car finance scandal is entering its remediation phase.
With the implementation of a redress scheme there is now a process for car finance claims to follow. This includes PCP claims and possible PCP refunds.
Not every customer will be entitled to compensation but many still will.
The better position you are in is understanding how it all works. Know what you can expect and when as well as your options. Get a head start and have your claim prepared now.
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References:
- PS26/3 was released in March 2026 - https://www.fca.org.uk/publication/policy/ps26-3.pdf
- The FCA also expects the first wave of payouts 2026 to take place from late 2026 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
- FCA banning discretionary commission in 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models
- Supreme Court decision in August 2025 - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
- The FCA has updated its estimates, with average compensation now expected to be around £829 per agreement - https://www.bbc.com/news/live/czx94evl5lrt
- October 2025 - The FCA opens a consultation on a proposed redress scheme - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
- December 2025 - The FCA confirms complaint handling timelines and publishes updated guidance - https://www.fca.org.uk/news/statements/motor-finance-compensation-scheme-consultation-progress-and-timing