LONDON — Major lenders including Santander have agreed to compensate millions of motorists [1] for mis-sold car finance deals under a Financial Conduct Authority scheme. The move follows a regulatory investigation into discretionary commission arrangements that inflated borrowing costs for consumers.

Millions affected by car finance mis-selling

The FCA car finance review found around 12.1 million agreements could be affected by car finance mis-selling, making this one of the largest financial redress programmes in the UK.

Total car finance compensation is expected to reach between £7.5 billion and £9 billion, with millions of car finance claims, including PCP claims, set to be processed. The average payout is estimated at about £829 per agreement [2].

The scheme covers loans taken out between April 6, 2007, and November 1, 2024 [3], particularly those involving discretionary commission arrangements, which were banned in 2021 after regulators found they created unfair costs for borrowers.

Santander and lenders accept FCA redress scheme

Santander confirmed it will not challenge the scheme [4] and will instead focus on implementation, signalling broader industry acceptance of responsibility in the car finance scandal.

Under the plan, lenders must review historic agreements and issue a car finance refund where customers were overcharged. This includes PCP refund payments for affected personal contract purchase agreements.

The FCA said the scheme was designed to ensure fair outcomes while maintaining consistency across firms, following consultation feedback from lenders, consumer groups and policymakers.

Who qualifies for car finance claims

Customers may be entitled to car finance claims if they were mis-sold due to not being made aware of the commission being paid to the dealer. They could also be entitled if they have been paying higher interest rates on the basis of dealer incentive schemes.

Typically you could be entitled if:

• You have an agreement with a discretionary commission structure or a high commission deal.
• You have a loan deal which you were not provided with information and were unable to negotiate.

Non-eligibility: Loans with very low or no interest.

Payouts 2026 and timeline for compensation

The FCA expects some payouts to begin this year, with priority given to customers who have already submitted complaints.

Key deadlines include:

• Firms must prepare systems by June 30, 2026, for newer cases
• Older cases must be processed by August 31, 2026
• Most claims are expected to be settled by the end of 2027

Large-scale payouts 2026 are anticipated once firms complete reviews and begin issuing decisions within three months of deadlines.

What customers should do next

Consumers do not need to rush to file a PCP claim or other car finance claim immediately. The FCA said lenders must contact customers who are likely owed compensation.

While the scheme is designed to be accessible directly through lenders, some consumers may still choose to seek assistance from claims management companies or legal representatives when pursuing car finance claims or do a car finance refund check online.

Ongoing scrutiny of the car finance sector

The scale of the redress highlights the extent of the car finance scandal and raises wider concerns about historic lending practices.

Regulators said the scheme aims to restore trust in the market while ensuring consumers who were affected by mis-sold car finance receive appropriate compensation.

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References:

1. Major lenders including Santander have agreed to compensate millions of motorists - https://www.ft.com/content/a2e9cd62-3e0c-4600-9f1f-4a8442335c08?syn-25a6b1a6=1
2. The average payout is estimated at about £829 per agreement -https://www.fca.org.uk/publication/policy/ps26-3.pdf
3. The scheme covers loans taken out between April 6, 2007, and November 1, 2024 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
4. Santander confirmed it will not challenge the scheme - https://www.thesun.co.uk/money/38928382/bank-mis-sold-car-loans-pays-compensation/