LONDON — Millions of UK motorists who believe they were caught up in the car finance scandal could receive payouts in 2026 if the Financial Conduct Authority (FCA) moves forward with a nationwide compensation scheme [1].

The regulator said it is currently reviewing more than 1,000 responses to its consultation on a plan designed to address complaints about mis-sold car finance agreements. The proposals focus on historic motor finance deals where commission arrangements between lenders and brokers may not have been properly explained to customers.

If the scheme proceeds, the FCA expects to publish final rules later in March [2]. However, the watchdog stressed that final decisions have not yet been made.

Implementation period expected for car finance claims

Because of the scale of the issue, lenders will likely be given time to prepare before reviewing large numbers of car finance claims and PCP claims.

The FCA said the scheme could include a three-month implementation period [3]. Older agreements may require up to five months to allow lenders to review historic deals linked to potential car finance mis-selling.

Even with this preparation period, the regulator said the streamlined process could still allow millions of motorists to receive car finance compensation during 2026 [4].

What could make an agreement unfair

The FCA said compensation will only be paid where certain commission arrangements were not properly disclosed to the customer when the finance agreement was taken out.

Drivers could qualify for car finance compensation if they were not told about one of three arrangements between lenders and brokers. These include discretionary commission arrangements, where brokers could influence the interest rate offered to the customer. Another example is a high commission arrangement where a large share of the total cost of credit was paid to the broker. A third situation involves agreements that gave a lender near-exclusive rights to provide the finance.

If motorists were not told about these arrangements when signing their finance deal, the regulator may consider the agreement unfair and eligible for a car finance refund.

How the car finance claim process could work

The regulator also outlined plans to make the process simpler for consumers making car finance claims or PCP claims.

Under the proposals:

• Consumers who have already complained about mis-sold car finance would automatically be included once the scheme begins.
• Within three months after the implementation period ends, lenders would inform customers whether they are owed a car finance refund and how much they could receive.
• Consumers would be able to accept a compensation offer immediately instead of waiting for a final determination.
• Firms would be able to contact customers through a range of communication channels rather than relying solely on recorded delivery.

The regulator said these changes are intended to make the process clearer and easier for both consumers and lenders.

Drivers encouraged to check their finance agreements

Millions of motorists used personal contract purchase agreements to fund vehicles over the past decade, meaning PCP claims are expected to form a significant part of the review.

Experts say drivers who previously used PCP or hire purchase agreements may want to carry out a car finance refund check to see whether they could qualify for a car finance refund.

Many of the potential car finance claims relate to cases where interest rates may have been influenced by commission arrangements between brokers and lenders.

One of the UK’s largest compensation exercises

If the scheme proceeds, the review could become one of the largest consumer redress programmes in the UK financial sector.

The FCA said the aim is to ensure people affected by car finance mis-selling receive fair car finance compensation while allowing lenders to review large numbers of historic agreements efficiently.

For many drivers who believe they were affected by the car finance scandal, submitting a car finance claim, a PCP claim, or carrying out a car finance refund check may help determine whether they are eligible for compensation once the regulator confirms the final scheme.

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References:

1. Millions of UK motorists who believe they were caught up in the car finance scandal could receive payouts in 2026 if the Financial Conduct Authority (FCA) moves forward with a nationwide compensation scheme - https://www.ft.com/content/31057adc-5b02-4778-82c5-f95ce2824918
2. the FCA expects to publish final rules later in March - https://www.fca.org.uk/news/statements/motor-finance-compensation-scheme-include-implementation-period
3. The FCA said the scheme could include a three-month implementation period - https://www.thesun.co.uk/money/38402225/drivers-car-finance-compensation-watchdog-update/
4. the regulator said the streamlined process could still allow millions of motorists to receive car finance compensation during 2026 - https://www.autocar.co.uk/car-news/consumer/payouts-car-finance-scandal-will-begin-year-fca-confirms