Many people who bought a vehicle on credit between 2007 and 2024 may be owed money because of undisclosed commission arrangements between lenders and car dealers. The Financial Conduct Authority (FCA) confirmed a compensation scheme on 30 March 2026, but the scheme has since been legally challenged and parts of it are suspended. This guide summarises FCA statements and its consumer page, last updated on 16 September 2026. It is general information, not financial or legal advice.
Which agreements are in scope
The FCA says the scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid commission to the broker, usually the dealer. That includes hire purchase and personal contract purchase deals for a car, motorbike, van or campervan. The FCA estimates around 12.1 million agreements are eligible. Personal contract hire (leasing) is not covered, nor are agreements already decided by the Financial Ombudsman Service or a court.
The three arrangements that matter
Compensation depends on the customer not being told about at least one of three arrangements between lender and broker:
- a discretionary commission arrangement, which let the broker adjust the interest rate to earn a higher commission;
- a high commission arrangement, where commission was at least 39% of the total cost of credit and 10% of the loan; or
- a contractual tie giving a lender exclusivity or a right of first refusal, unless visible links between lender, manufacturer and dealer (such as a common or similar name) existed.
The FCA treats an agreement as fair if commission was £120 or less for agreements starting before 1 April 2014 or £150 or less from that date, or if no interest was charged. Loans above a yearly high-value threshold are also outside the scheme, although those borrowers can still complain in the normal way.
How compensation is calculated
In the most serious cases, around 90,000 consumers whose circumstances resemble the Supreme Court’s Johnson case, the FCA says redress is all the commission plus interest. For most others it is the average of the estimated loss and the commission paid, plus interest. The estimated loss is a percentage reduction in the APR: 17% for agreements from April 2014 and 21% for earlier ones. Simple interest runs at the annual average Bank of England base rate plus 1%, with a minimum of 3% in any year.
The FCA expects compensation to be capped in around one case in three, to the lowest of 90% of commission plus interest and two cost-of-credit limits, and it estimates the average at about £830 per agreement. Someone whose interest rate was in the lowest 5% offered at the time, excluding 0% deals, will not receive compensation.
The legal challenge and the timetable
The FCA says four parties challenged the scheme, and on 2 July 2026 the Upper Tribunal suspended parts of it on terms agreed with those challengers. The Tribunal will hear the challenges on 14 to 18 December 2026 or 16 to 26 February 2027, depending on applications for expert opinion or disclosure. Until the process concludes, the FCA states that lenders do not need to calculate or pay compensation. If the scheme is upheld and there is no appeal, the FCA expects payments to begin in 2027. If it is overturned in whole or part, the FCA says it may instead tell lenders to resolve complaints individually, with an eight-week response time and recourse to the Financial Ombudsman Service, as explained in the guide to complaining to the Financial Ombudsman Service.
Some parts remain in force. The FCA says a lender must tell a complainant who is not owed compensation by 18 November 2026 (agreement from 1 April 2014, complaint by 30 June 2026) or by 18 January 2027 (earlier agreement, complaint by 31 August 2026). Silence from a lender does not mean compensation is due.
What to do now
The FCA advises complaining directly to the lender, which is free. A lender can be found by checking old bank statements, asking the dealer, or looking at the credit file; the FCA also lists lenders on its site. Once a determination arrives, the customer has one month to accept or challenge it, and the lender has one month to pay after acceptance. A customer who disagrees can complain to the Financial Ombudsman Service by the date in the determination letter.
The FCA says a claims management company or law firm is not needed, and fees can be as high as 36% including VAT, so it warns against signing with several. See also the guide to claims management companies and fee caps. Scammers have posed as lenders offering fake compensation, so bank details should be shared only when the sender is certain, and PINs and passwords never.
FAQs
Will I be paid automatically?
Not necessarily. The FCA says consumers who have not complained may be contacted only if they are likely owed money, and those not contacted can still complain to their firm by 31 August 2027.
Does it cover customers who have died?
Yes. The FCA says the scheme covers agreements of customers who have since died, and beneficiaries may be able to claim. The lender is likely to ask for the will or grant of probate.
Is the lender’s failure covered by compensation funds?
The FCA says this type of borrowing is not covered by the Financial Services Compensation Scheme, so redress may not be paid if a lender goes out of business.
The bottom line
The FCA’s motor finance redress scheme could compensate holders of car finance agreements made between 6 April 2007 and 1 November 2024 who were not told about certain commission or tie arrangements, with an average estimated at about £830. Because of the Upper Tribunal challenge, lenders need not calculate or pay redress until the case ends, and any payments under an upheld scheme are expected in 2027. Complaining directly and free of charge, and ignoring cold-call compensation offers, remain the FCA’s main advice. This is general information, not financial or legal advice.
Sources
- FCA confirms motor finance redress scheme, first published 30 March 2026 (fca.org.uk)
- Motor finance scheme partially suspended, 2 July 2026 (fca.org.uk)
- Car finance claims, last updated 16 September 2026 (fca.org.uk)