A UK government tax windfall will be about £2bn less than expected due to the recent launch of a new industry-wide car finance compensation scheme. Recent analysis revealed that the redress plan for mis-sold motor finance agreements is set to reduce the tax receipts by nearly £2 billion [1]. The Financial Conduct Authority (FCA) announced a car finance scandal that has mis-sold millions of car finance agreements over the last 20 years. The average compensation for this initiative is expected to be around £700 per agreement [2] marking one of the UK’s biggest regulatory crackdowns in the car finance industry to date.

FCA Consultation and Redress Details

On 7 October 2025, the FCA opened a public consultation [3] to examine proposals for compensating consumers who may have been mis-sold motor finance products. The consultation also asks for input from stakeholders, lenders and affected consumers. A framework for compensation is made clear. The scheme would apply to all motor finance agreements made from 6 April 2007 to 1 November 2024. This wide window shows the FCA’s determination to come to grips with historic mis-selling.

According to the FCA, individuals could receive an average payout of approximately £700 per agreement, although the exact sum will vary depending on the circumstances of each contract. To accommodate further consultation and feedback, the FCA has extended the deadline to 12 December 2025 [4], giving consumers and industry participants additional time to provide input.

The FCA has made clear in its consultation paper that it wants to see a process which is "transparent and accessible". It is therefore putting in place a single channel for consumers to make car finance mis-selling claims. The FCA hopes this will provide a more proportionate means of making sure consumers receive the redress they are entitled to, without the potential delays which can occur with individual complaints to lenders or the Financial Ombudsman Service.

What Should You Do Now?

You can take action before the FCA scheme opens. If you have already made a complaint, check your contact details with your lender. The FCA says only customers they can trace will be notified. You should raise a complaint now to ensure it is logged and ready to process on the opening of the FCA programme.

If you have not yet complained there are several routes you can follow:

1. Submit a Complaint to Your Lender: Consumers can raise concerns directly with their finance provider. This is at no cost and allows the lender to deal with any mis-selling prior to the FCA scheme opening.
2. Use a Claims Management Company: A claims management company will let professionals take your complaint and do all the leg work for you. They can track down your finance trail, submit the claim and liaise with lenders, often on a no win, no fee basis.
3. Wait for the FCA Scheme: The scheme, which is expected to launch in 2026, will automatically cover any complaints that have been logged, and any eligible agreements. It’s thought this should speed up the process of consumers receiving compensation.

Consumers who engage early may receive updates on latest updates on car finance claims in the UK and ensure their details are up to date.

How a Claims Management Company Can Help

Many consumers are currently considering if they want to do this on their own or use professional assistance. Utilising the services of a claims management company makes the process easier if you have lost any paperwork or are unsure of the terms of agreements in the past.

A finance claims expert can:

• Trace your finance history using minimal personal information such as your name, address, and date of birth.
• Submit complaints on your behalf without requiring paperwork.
• Provide guidance on PCP claims, fixed commission agreements, or car finance refund processes.
• Clarify timelines, including how long does a PCP claim take and when is the PCP payout.

If you are looking for the best car finance claim company, make sure you use a trusted service like Reclaim247 to process all of your claims. Seeking professional help also reduces the risk of making mistakes. This is particularly true if you are claiming against a large-scale FCA scheme. Understanding how long does Reclaim247 take can help you have realistic expectations around when you can get your compensation.

Why Taking Action Matters

Engaging early provides several advantages. If you have already made a complaint, you are given priority when the FCA scheme opens. If you have recently moved house or changed contact details, ensure your complaint is easily identifiable by lenders who only have to contact those customers they can trace [5]. You should also put in your complaint now so your case is on the record and you are less likely to face delays when the compensation scheme is up and running.

For new complainants, using a claims management service removes uncertainty and simplifies the process. No paperwork, no hassle, no-win, no-fee. Services such as Reclaim247 make it easy for consumers to claim any redress that is due to them without having to deal with piles of paperwork.

Conclusion

The FCA’s proposed car finance compensation scheme represents a major step toward addressing mis-selling practices in the UK motor finance industry. Agreements that span from 2007 to 2024 and that have average payouts of approximately £700 are now covered by the initiative. The initiative is expected to result in millions of consumers making a claim and it will cost around £2 billion in lost tax receipts.

Consumers are being urged to act immediately by updating complaints with lenders, making new complaints or instructing a professional claims management company to do so. With the scheme not expected to open until 2026, getting your claim on the books and accessible to those administering the scheme may mean the difference between being at the front of the queue and being pushed back several years for a payout.

Taking action promptly is your best opportunity to reclaim your car finance refund by yourself, or through a service like Reclaim247. Doing so is a simple process that will result in you getting your money back in the easiest, most stress-free way possible. This is even more important now that the FCA has extended its deadline to consult on the changes until 12 December 2025, giving you the last possible opportunity to have your say.

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References: 

1. the redress plan for mis-sold motor finance agreements is set to reduce the tax receipts by nearly £2 billion - https://www.bloomberg.com/news/articles/2025-11-26/uk-s-car-loan-compensation-to-cut-tax-receipts-by-2-billion
2. The average compensation for this initiative is expected to be around £700 per agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
3. On 7 October 2025, the FCA opened a public consultation -  https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
4. the FCA has extended the deadline to 12 December 2025 - https://www.fca.org.uk/news/statements/motor-finance-compensation-scheme-consultation-progress-and-timing
5. ensure your complaint is easily identifiable by lenders who only have to contact those customers they can trace - https://www.kslaw.com/news-and-insights/motor-finance-litigation-moves-up-a-gear-with-fca-plan