Updated: 29 July 2026
Originally Published: 30 June 2025
Key Takeaways
The car finance scandal remains one of the largest consumer finance issues ever investigated in the UK, with millions of historic agreements potentially affected.
Although the Financial Conduct Authority (FCA) confirmed its proposed redress scheme earlier this year [1], the process has since evolved. Several organisations have launched legal challenges against parts of the scheme, leading to a partial suspension of some implementation requirements while the Upper Tribunal considers the case.
It means that claims for car finance mis-selling can still be made by motorists, but there have been changes to the 2026 expectations around payouts. Car finance compensation calculations and payment have been suspended until after the legal process, which means a more general roll-out during 2027 is increasingly likely.
In this guide we cover everything you need to know, including: the latest car finance compensation update, how the FCA car finance scheme is expected to work, who could be eligible to make a car finance claim, what the current car finance claims deadline means and what the recent regulatory changes could mean for consumers.
What Is the Car Finance Scandal?
The car finance scandal centres on concerns that millions of motorists may not have been given enough information about how their vehicle finance agreements were arranged.
For many years, dealerships received commission from lenders for introducing customers to finance products. Commission itself was not unusual or unlawful. The issue was whether consumers were given clear, transparent information about how those commissions worked and whether they could influence the overall cost of borrowing.
In many cases, customers say they were never told:
- that the dealer would receive commission
- how the commission was calculated
- whether it affected their interest rate
- why a particular lender or finance product had been recommended
- whether alternative finance options had been considered
These concerns have resulted in millions of enquiries relating to mis-sold car finance, with motorists seeking to understand whether their agreements may qualify for car finance compensation.
While not every agreement was affected by car finance mis-selling, the FCA concluded that historic commission practices created circumstances where some consumers may not have been treated fairly. That ultimately led to regulatory investigations, court proceedings and the proposed compensation scheme now being developed.
Latest Car Finance Compensation Update (July 2026)
Since this guide was last updated in April 2026, a number of key developments have occurred in relation to car finance claims.
In March 2026, the FCA issued its final policy statement (PS26/3) [2] in which it confirmed its intention to establish an industry-wide redress scheme covering eligible motor finance agreements entered into from April 2007 to November 2024.
The roll out of the scheme has not quite happened in the way first envisioned.
Several organisations have challenged parts of the proposed scheme through the Upper Tribunal [3], arguing that aspects of the FCA's approach should be reconsidered. As a result, parts of the implementation process have been partially suspended while those legal proceedings continue.
This does not mean the proposed scheme has been cancelled.
Consumers can still submit complaints and begin a car finance claim, while lenders are continuing much of the preparation work required to operate the scheme if it proceeds.
The FCA has also updated its guidance to firms, confirming that although compensation calculations, payments and formal compensation notifications are currently paused, firms should continue preparing operationally by identifying affected agreements, gathering commission data and ensuring they are ready to administer the scheme if the legal challenges are resolved.
For consumers, the biggest practical change is timing. Earlier expectations that many motorists could begin receiving payouts 2026 have now become less likely, with compensation more widely expected during 2027 depending on the outcome of the Tribunal proceedings.
Why Has the FCA Car Finance Scheme Been Delayed?
The proposed redress scheme has not been delayed because the FCA has changed its position on historic commission practices.
Instead, the delay reflects ongoing legal challenges brought against elements of the regulator's proposed compensation framework.
Those proceedings are now being considered by the Upper Tribunal, which will determine whether aspects of the FCA's rules should proceed as drafted or require changes before implementation continues.
Importantly, the complaints process itself has not been suspended.
Motorists can still raise concerns about mis-sold car finance, submit complaints to lenders and begin gathering the information needed for a future car finance refund or car finance compensation assessment.
For many consumers, this means there is still value in acting now rather than waiting for the legal process to conclude.
What Does the FCA's Partial Suspension Mean?
The term partial suspension has caused understandable confusion since it was announced in July 2026. While some reports suggested the FCA car finance compensation scheme had been put on hold, that is not the case.
The proposed redress scheme is still very much alive. What has changed is that some parts of the implementation process have been temporarily paused while the Upper Tribunal considers the legal challenges.
At the moment, firms are not required to:
- calculate car finance compensation
- make compensation payments
- send compensation notifications to customers whose agreements may qualify
These requirements have been temporarily suspended until the Tribunal reaches a decision or the FCA issues further guidance.
However, many other responsibilities remain in place.
Lenders are still expected to continue preparing for the proposed scheme by:
- identifying potentially affected finance agreements
- reviewing historic commission records
- gathering customer and agreement data
- developing the systems needed to process future car finance claims
- preparing operationally for large-scale compensation if the scheme proceeds
In other words, the pause relates to paying compensation, not to preparing for it.
For consumers, this means there is no need to assume the car finance scandal has come to an end or that existing complaints have become invalid. The FCA has repeatedly made it clear that firms should continue getting ready so they can begin administering the scheme as quickly as possible if the legal proceedings conclude in its favour.
Who Is Challenging the FCA's Compensation Scheme?
Following publication of the FCA's final policy statement in March 2026, several organisations launched legal challenges against parts of the proposed compensation framework.
The challenges do not dispute every aspect of the FCA's work. Instead, they focus on how certain parts of the proposed redress scheme have been designed and whether the regulator has acted within its legal powers.
The organisations challenging the scheme include:
- Volkswagen Financial Services
- Mercedes-Benz Financial Services
- Crédit Agricole Auto Finance
- Consumer Voice
These cases are now being considered by the Upper Tribunal.
Until those proceedings are resolved, parts of the FCA's implementation timetable remain temporarily suspended.
This has naturally affected expectations around payouts 2026. When the scheme was first announced, many consumers hoped to receive car finance compensation before the end of the year. Following the Tribunal's partial suspension order, that timetable has become less certain, with many industry observers now expecting compensation to begin during 2027 instead.
What Happens Next?
The next significant date will be the Upper Tribunal hearings at which the challenges will be determined.
Directions as they stand are for hearings to be held on 14 and 18 December 2026 or, if necessary, on 16 and 26 February 2027.
Once the Tribunal reaches its decision, the FCA will determine whether the scheme can continue as planned or whether any changes are needed before compensation payments begin.
Until then, consumers can still submit a car finance claim, request information from their lender and complete a car finance refund check if they believe they may have been affected by mis-sold PCP car finance.
Waiting for the legal process to conclude is not usually necessary. Raising a complaint now means your lender is already aware of your circumstances and can continue preparing your case alongside its wider work on the proposed scheme.
Who May Be Eligible for Car Finance Compensation?
One of the biggest misconceptions surrounding the car finance scandal is that every motor finance agreement automatically qualifies for compensation. That is not the case.
Whether you are eligible to claim car finance compensation will depend on the individual circumstances of your agreement. This includes how it was sold to you, the information you were provided at the time, and whether the lender or dealership met their obligations. The FCA’s proposed redress scheme will centre on agreements where consumers may not have received clear, fair and transparent information before they entered into the finance agreement.
You may have a basis for a car finance claim if:
- the commission paid to the dealer was not properly disclosed
- you were not informed how your rate of interest had been arrived at
- the dealership seemed to recommend one finance product without discussing the alternatives
- dealer incentives may have affected the recommendation
- key costs or features of the agreement were not fully explained before you signed up
Not all agreements that meet one of these criteria will automatically be eligible for a payout. Each car finance claim will still be assessed on its individual facts.
Which Car Finance Agreements Could Be Covered?
The FCA's proposed compensation scheme applies to regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024.
This includes many of the finance products commonly used to buy cars in the UK, including PCP car finance and Hire Purchase (HP) agreements.
The FCA has divided eligible agreements into two groups to help lenders administer the scheme more efficiently.
Scheme 1
- Agreements entered into between 6 April 2007 and 31 March 2014
Scheme 2
- Agreements entered into between 1 April 2014 and 1 November 2024
Although the administration of each scheme differs, both are intended to address historic concerns about car finance mis-selling and undisclosed commission arrangements.
Importantly, your agreement falling within these dates does not guarantee you'll receive car finance compensation. It simply means it may fall within the period covered by the proposed scheme.
What Made Some Agreements Potentially Unfair?
The FCA's review identified several historic practices that could have placed consumers at a disadvantage.
Rather than focusing on a single issue, the regulator looked at whether customers had enough information to make an informed financial decision.
Some of the most common issues included:
Undisclosed Commission
Many motorists only discovered years later that the dealership received commission for arranging their finance.
Commission itself was not necessarily unfair. The concern was whether consumers were given enough information to understand how it worked and whether it could affect the cost of borrowing.
Interest Rates Influenced by Commission
Before discretionary commission arrangements were banned in 2021, some dealers had flexibility to increase the interest rate within limits set by the lender.
In some cases, a higher interest rate resulted in higher commission for the dealership.
Consumers often say they were unaware this was possible when they agreed to the finance.
Limited Choice of Lenders
Some customers believed the dealership had compared finance products from across the market before recommending the most suitable option.
In reality, some dealerships only worked with a limited panel of lenders or had commercial arrangements that influenced which products were offered.
Where these arrangements were not explained clearly, consumers have questioned whether they were given enough information to make an informed choice.
Lack of Transparency
The FCA has consistently emphasised that transparency sits at the heart of the car finance scandal.
Many car finance claims do not centre on commission itself, but on whether consumers understood:
- why a particular lender had been recommended
- how their interest rate had been set
- whether commission was being paid
- the total cost of borrowing
- the key features of their agreement
The proposed compensation scheme is designed to address situations where consumers may not have received the information needed to make a fully informed decision.
Can You Still Make a Car Finance Claim if You've Paid Off the Agreement?
Yes.
One of the most common myths surrounding mis-sold car finance is that you can only complain if you're still making monthly payments.
In reality, many of today's car finance claims relate to agreements that ended years ago.
You may still be able to make a car finance claim if:
- you've finished paying the agreement
- you've sold or traded in the vehicle
- you voluntarily returned the car
- you no longer have the original paperwork
- the dealership has since closed
The important factor is the finance agreement itself, not whether you still own the vehicle.
If you're unsure whether an old agreement falls within the proposed scheme, a car finance refund check can help establish whether your finance may warrant further investigation.
How Will Car Finance Compensation Be Calculated?
One of the most common questions surrounding the car finance scandal is how much compensation eligible consumers could receive.
The simple answer is that there is no fixed payout.
Every car finance claim will be assessed individually, taking into account the details of the agreement, how it was sold and whether the customer experienced financial loss as a result of historic commission arrangements or other unfair practices.
When the FCA published its proposed redress scheme, it also outlined a standardised approach designed to compensate consumers fairly while allowing millions of car finance claims to be processed consistently.
Rather than awarding everyone the same amount, lenders are expected to calculate compensation based on the individual circumstances of each agreement.
The FCA's Proposed Compensation Model
The FCA's proposed methodology combines two important elements.
The first considers the financial impact of any unfair pricing, including whether the consumer paid more because of the way the agreement was arranged.
The second considers the commission paid as part of the finance agreement.
These figures are then combined using the FCA's proposed methodology before compensatory interest is added where appropriate.
The objective is to place consumers back in the financial position they would likely have been in had the agreement been arranged fairly.
This means a car finance refund is intended to compensate for financial loss rather than provide a financial windfall.
Average Compensation Figures
The FCA estimates that around 12.1 million finance agreements could fall within the scope of the proposed scheme.
Across those agreements, average car finance compensation has been estimated at approximately £829 per agreement [5].
The FCA has also published separate modelling for each scheme:
- Scheme 1 (2007 to March 2014): around £734 per agreement
- Scheme 2 (April 2014 to November 2024): around £881 per agreement
These figures are only averages based on the FCA's modelling.
Some consumers may receive more, while others could receive less or no compensation at all, depending on the facts of their individual car finance claim.
Why Compensation Can Vary
No two finance agreements are exactly the same.
Several factors may influence the amount of car finance compensation, including:
- the amount borrowed
- the length of the agreement
- the interest rate charged
- how commission was structured
- whether commission influenced pricing
- the level of financial loss experienced
- the quality of information provided before the agreement was signed
This is why it is impossible to estimate compensation accurately using only a vehicle's purchase price or monthly payment.
Will Everyone Receive Compensation?
No.
Although millions of agreements may fall within the proposed scheme, not every consumer will receive a car finance refund.
The FCA expects lenders to assess each agreement individually.
Some agreements may fall outside the scope of the proposed scheme because:
- commission arrangements were fully disclosed
- the agreement does not meet the FCA's eligibility criteria
- the customer did not experience financial loss
- the lender concludes the agreement was fair based on the available evidence
This is one reason why motorists are encouraged to begin with a car finance refund check rather than assuming they automatically qualify for compensation.
What About PCP Claims?
The same principles are expected to apply to eligible PCP claims.
If you entered into PCP car finance between April 2007 and November 2024, your agreement may also be reviewed under the proposed FCA scheme if it falls within the eligibility criteria.
Many PCP finance claims relate to concerns that consumers were not fully informed about commission arrangements, interest rates or the way the agreement had been structured.
Whether you're considering a PCP claim, a PCP compensation claim or simply want to understand whether a historic agreement may be affected, the outcome will depend on the specific facts of your agreement rather than the finance product itself.
If you're unsure where to begin, completing a PCP claim check can help establish whether your agreement may warrant further investigation and whether you could potentially be entitled to a PCP refund.
Car Finance Compensation Is Still Subject to the Legal Challenges
Although the FCA has published its proposed methodology, compensation is not currently being calculated or paid under the redress scheme while parts of the implementation remain subject to the Upper Tribunal proceedings.
The methodology itself could still change depending on the outcome of those legal challenges.
However, the FCA continues to maintain that a standardised redress scheme remains the quickest and fairest way of resolving millions of car finance claims, and lenders are continuing to prepare for implementation should the scheme proceed.
When Will Car Finance Compensation Be Paid?
One of the biggest changes since our last car finance compensation update is the expected timetable for compensation payments.
When the FCA published its proposed redress scheme in March 2026, many consumers hoped the first wave of compensation would begin before the end of the year. However, the legal challenges and subsequent partial suspension have changed those expectations.
At present, lenders are continuing to prepare for the proposed scheme, but they are not currently required to calculate compensation, make payments or issue compensation notifications while the Upper Tribunal proceedings continue.
As a result, widespread payouts 2026 are now considered unlikely.
Instead, if the proposed scheme proceeds following the legal challenges, many industry observers expect compensation payments to begin during 2027.
Why Have Payouts Been Delayed?
The delay is not because the FCA has withdrawn the proposed compensation scheme.
Instead, it reflects the legal process currently taking place in the Upper Tribunal.
Several organisations have challenged parts of the FCA's proposed redress framework, meaning some implementation requirements have been temporarily suspended until those proceedings have concluded.
During this period, firms must continue preparing operationally, but they do not yet need to begin calculating or paying car finance compensation.
While this may be frustrating for consumers, the FCA has said the pause is intended to avoid firms carrying out work that may need to be revisited if the Tribunal requires changes to the scheme.
What Happens After the Tribunal?
The next major milestone will be the Upper Tribunal hearings, currently expected to take place between 14 and 18 December 2026, or, if required, 16 and 26 February 2027.
Following those hearings, the Tribunal will issue its decision.
The FCA will then determine whether:
- the proposed scheme can continue as planned
- amendments are required before implementation resumes
- firms can begin calculating compensation and making payments
Until then, consumers should expect further updates from the FCA as the legal process progresses.
Should You Wait Before Making a Car Finance Claim?
Although compensation payments have been delayed, waiting to submit a car finance claim is unlikely to provide any advantage.
Consumers can still contact their lender, raise concerns about mis-sold car finance and begin the complaints process.
Taking action now means your agreement can be identified while firms continue preparing for the proposed scheme.
Many motorists also choose to complete a car finance refund check to establish whether their agreement could fall within the scope of the FCA's proposed redress scheme.
If your agreement involved PCP car finance, completing a PCP claim check may also help you understand whether you could have grounds for a future PCP compensation claim.
Car Finance Claims Deadline
Although compensation has been delayed, the proposed car finance claims deadline remains an important date for consumers to understand.
Under the FCA's proposed scheme, motorists who are not contacted by their lender but believe they may be eligible will generally have until 31 August 2027 to come forward and opt into the scheme.
This deadline is intended to provide certainty for both consumers and lenders while allowing enough time for firms to identify potentially affected agreements.
However, the deadline does not mean you should wait until 2027 before taking action.
Submitting a car finance claim or completing a car finance refund check sooner allows you to understand your position earlier and helps ensure your agreement is already on record if the proposed scheme proceeds.
If you're unsure whether your agreement qualifies, or whether historic PCP finance claims could apply to your circumstances, it's generally better to begin investigating now rather than waiting until the final stages of the process.
Current Position at a Glance
As of July 2026, the position is:
FCA redress scheme: Proposed and awaiting legal outcome
Consumer complaints: Still open
Lenders preparing for the scheme: Yes
Compensation calculations: Temporarily suspended
Compensation payments: Temporarily suspended
Compensation notifications: Temporarily suspended
Widespread payouts 2026: Now unlikely
Upper Tribunal hearings: Expected from December 2026
Car finance claims deadline: 31 August 2027 for eligible consumers who are not contacted by their lender
Frequently Asked Questions About the Car Finance Scandal
What is the car finance scandal?
The car finance scandal relates to concerns that millions of motorists may not have received enough information about how their finance agreements were arranged. Many agreements involved commission paid by lenders to dealerships, but consumers were not always told how that commission worked or whether it could influence the cost of borrowing.
The problem is not that commission was in place, but whether customers were treated fairly and given all of the information they needed to make a sensible decision. It is these concerns which have resulted in many millions of car finance claims and FCA’s proposed industry-wide compensation scheme.
Can I still make a car finance claim?
Yes.
Consumers can still make a car finance claim even though parts of the proposed FCA scheme have been temporarily suspended.
Lenders continue to accept complaints and are expected to keep preparing for the scheme while the legal challenges are considered by the Upper Tribunal.
If you believe you may have been affected by mis-sold car finance, there is no requirement to wait before raising a complaint.
Has the FCA cancelled the compensation scheme?
No.
The FCA has not cancelled its proposed compensation scheme.
Instead, parts of the implementation have been temporarily suspended while legal challenges are considered.
The regulator continues to support an industry-wide redress scheme and expects firms to continue preparing operationally while the Tribunal proceedings are ongoing.
Why have car finance compensation payments been delayed?
The latest car finance compensation update reflects the legal challenges brought against parts of the FCA's proposed redress scheme.
As a result of the Upper Tribunal's partial suspension order, firms are not currently required to calculate compensation, make payments or issue compensation notifications.
Although payouts 2026 were originally expected following publication of the FCA's proposed scheme, compensation is now more widely expected during 2027, subject to the outcome of the legal proceedings.
What is the car finance claims deadline?
The proposed car finance claims deadline is 31 August 2027 for eligible consumers who are not contacted directly by their lender.
If your lender contacts you before then, different timescales may apply.
Waiting until the deadline is rarely advisable. Raising a complaint sooner allows your lender to begin reviewing your agreement while continuing preparations for the proposed scheme.
Am I eligible for car finance compensation?
Eligibility will depend on the facts of your individual case.
You could be entitled to car finance compensation if important information was not properly explained to you when you took out your finance agreement such as commission arrangements, how the interest rate was calculated or the total cost of borrowing.
Every car finance claim will be judged on its individual merits.
Can I make a claim if I no longer own the vehicle?
Yes.
Many car finance claims relate to agreements that ended years ago.
You may still be eligible even if:
- you've paid off the finance
- you've sold the vehicle
- you've returned the vehicle
- the dealership has since closed
- you no longer have the paperwork
The agreement itself is usually more important than whether you still own the car.
Do I need my original paperwork?
Not necessarily.
The FCA expects lenders to rely on their own records when assessing eligible agreements.
If you no longer have your original finance documents, you may still be able to begin a car finance refund check using basic information such as the lender, vehicle registration or approximate dates of the agreement.
What is a PCP claim?
A PCP claim relates to a Personal Contract Purchase agreement where a consumer believes the finance may have been sold unfairly.
Many PCP claims focus on historic commission arrangements, transparency and whether customers received enough information before signing their agreement.
Like all finance agreements, each case depends on its own facts.
Can I make a PCP compensation claim?
Potentially.
If your PCP car finance agreement falls within the period covered by the FCA's proposed scheme and the circumstances meet the eligibility criteria, you may be able to make a PCP compensation claim.
This includes some historic PCP finance claims involving concerns about commission disclosure or the way the finance agreement was explained.
What is a PCP refund?
A PCP refund is compensation that may be paid if an eligible PCP claim is upheld under the FCA's proposed redress scheme or through another legal route.
The amount varies depending on the facts of the agreement and will not be the same for every consumer.
How do I know if my PCP agreement could be affected?
If you are not sure whether historic PCP car claims could be relevant to you, try the PCP claim checker which will give you an idea of whether your agreement could be worth investigating further.
The next step for many consumers is to start going through agreements that they signed several years ago now that they are more aware of the car finance scandal and the FCA’s proposed compensation scheme.
What should I do next?
If you believe you may have been affected by car finance mis-selling, the first step is to understand who provided your finance and when the agreement was taken out.
You can then complete a car finance refund check or PCP claim check to see whether your agreement may fall within the scope of the proposed scheme.
Although compensation payments have been delayed, consumers do not need to wait before raising concerns or gathering information about their historic finance agreements.
Final Thoughts
The ongoing car finance scandal develops further as the FCA gears up to deliver one of the UK’s biggest consumer redress schemes.
Delays to the original timetable for the expected compensation payment have arisen from legal challenges, however they have not yet come to a conclusion. Consumers can continue to make car finance claims, with lenders actively working on their preparation for when the Upper Tribunal rules on the outstanding matters.
If you took out PCP car finance or another type of regulated motor finance agreement between 6 April 2007 and 1 November 2024, it might be time to take a closer look at how your agreement was put together. Not all consumers will be eligible for car finance compensation but the more you know about your rights now, the better placed you will be to make decisions about car finance claims and other options as the FCA scheme develops.
Whether you are weighing up making a claim for car finance compensation, considering historic PCP finance claims, or simply want to do a car finance refund check or PCP claim check, it helps to keep up to date with regulatory developments so you are in the best possible position to benefit if compensation does become available.
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References:
- the Financial Conduct Authority (FCA) confirmed its proposed redress scheme earlier this year - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
- In March 2026, the FCA issued its final policy statement (PS26/3) - https://www.fca.org.uk/publication/policy/ps26-3.pdf
- Several organisations have challenged parts of the proposed scheme through the Upper Tribunal - https://consumervoice.uk/cars/fca-car-finance-compensation-challenge/
- While those legal proceedings remain ongoing, the FCA has introduced a partial suspension covering several implementation obligations - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended
- average car finance compensation has been estimated at approximately £829 per agreement - https://www.bbc.com/news/live/czx94evl5lrt