Thousands seek car finance claims as pressure mounts over FCA payouts 2026

LONDON — Tens of thousands of motorists have started legal action against Lloyds Banking Group [1] over car finance claims, bringing a collective £66 million claim against the bank in the High Court rather than join a proposed industry compensation scheme led by City regulator the Financial Conduct Authority (FCA). The action centres on allegations of mis-sold car finance linked to undisclosed commissions at the heart of the ongoing car finance scandal.

A law firm is preparing a group car finance claim on behalf of around 30,000 customers who took out finance agreements through Black Horse, Lloyds’ motor finance division. The case forms part of a wider wave of car finance claims tied to car finance mis-selling across the UK.

The move highlights growing concern among some consumers that the Financial Conduct Authority’s redress scheme may not deliver full car finance compensation. Current proposals suggest average payouts of about £700 [2], prompting some claimants to pursue court action in search of higher car finance refunds or a larger PCP refund.

Legal routes for a PCP claim or other PCP claims could result in increased car finance compensation, particularly where courts award full interest on agreements. However, pursuing car finance claims through the courts typically involves legal fees, which may reduce the final value of any car finance refund.

The FCA is expected to confirm full details of its redress scheme following its consultation, with payouts 2026 anticipated for early claimants who pursue a car finance claim through the regulator route.

Regulators have said the scheme is designed to provide a quicker and more accessible way to secure car finance compensation for those affected by mis-sold car finance. However, some consumer groups and legal representatives argue that the structure of the scheme may limit the overall value of a car finance refund compared with court outcomes.

The Lloyds case is expected to be one of the first large-scale legal challenges linked to the car finance scandal, with further group car finance claims against other lenders likely to follow later this year.

A separate Court of Appeal hearing in April is expected to decide if large group actions for car finance claims can proceed. The outcome could have important consequences for the way in which future PCP claims and other car finance claims are dealt with. For eligible agreements, motorists will have a choice of a quicker route to car finance compensation after a car finance refund check or the pursuit of potentially higher car finance refunds through the courts, as both the regulatory and legal processes mature.

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References:

1. Lloyds Banking Group is facing a £66 million legal challenge from tens of thousands of motorists - https://www.theguardian.com/business/2026/mar/27/lloyds-bank-66m-court-car-loan-law-fca
2. Current proposals suggest average payouts of about £700 - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme