The Financial Conduct Authority (FCA) has provided an update regarding a significant car finance compensation scheme that is in progress. The scheme aims to compensate drivers who were sold car finance deals between 2007 and 2024 without proper disclosure of broker commissions.
Affected drivers may be entitled to compensation if their car finance deals included discretionary commission arrangements (DCAs), allowing brokers and dealers to inflate interest rates to earn more commission. Eligible cases also involve high commission arrangements or situations where the broker failed to disclose an exclusive partnership with a particular lender.
In a recent announcement, the FCA has advanced the deadline for motor finance firms to address complaints. Originally set for July 31, 2026, the new deadline is now May 31, 2026. Complaint handling, paused since January 2024, will resume, with firms required to respond to complaints starting December 5, 2025.
Over 14 million car finance agreements may fall under the compensation scheme, anticipated to launch early next year. The FCA estimates that most individuals could receive approximately £700 in compensation. The FCA emphasized the need for prompt complaint resolution, highlighting that some consumers have been awaiting responses for nearly two years.
The FCA discourages the use of lawyers or claims management companies for complaints and advises contacting the lender directly for free complaint submissions. Individuals who have already lodged complaints before the scheme’s implementation are likely to receive compensation sooner. Lenders may collectively pay out an estimated £8.2 billion in compensation.
Consumer champion Martin Lewis has encouraged potentially affected individuals to submit complaints promptly. Lewis advised that even in cases where details are scarce, filing a complaint could be beneficial. The aim is to have cases reviewed for compensation eligibility. Lewis indicated that newer cases should seek clarification on compensation entitlement promptly.
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