If you bought a car on finance in the UK any time after April 2007, there is a reasonable chance you were overcharged, and the Financial Conduct Authority wants lenders to pay you back. The regulator’s probe into how dealers and finance companies set interest rates has grown into what could become the country’s biggest consumer compensation exercise since the payment protection insurance scandal, with the FCA estimating that the total bill to the industry could run into billions of pounds. A consultation paper published by the FCA suggests average redress of around £1,100 per affected agreement, though individual amounts will vary widely depending on the size of the loan and how much extra interest was loaded on.
For the roughly 2.5 million people the FCA believes may have valid claims, the process is about to accelerate. The regulator has confirmed that a formal redress scheme will follow its current consultation, and that the pause it placed on complaint handling will lift on 31 May 2026. After that date, lenders must start working through a backlog that consumer lawyers describe as enormous. Here is what happened, who qualifies, and what you should do now.
How the scandal started
For years, many car dealers in the UK operated under what the FCA calls discretionary commission arrangements. Under these models, the broker who arranged your finance could increase the interest rate on your loan and pocket a larger commission as a reward. The higher the rate you paid, the more the dealer earned. The FCA banned discretionary commission models in January 2021, but by that point they had been standard practice across much of the motor trade for well over a decade.
The regulator’s own research found that these arrangements added an average of £1,100 in extra interest to each affected deal, and that most customers had no idea the system worked this way. Dealers were not required to volunteer the information, and many did not. The result was a market in which millions of people signed finance agreements, from PCP contracts on new hatchbacks to hire purchase deals on used vans, without knowing that the person across the desk had a direct financial incentive to charge them more.
Complaints began to pile up, and in October 2024 the issue reached the Supreme Court. The court’s ruling in Johnson v FirstRand Bank confirmed that motor finance brokers owe a fiduciary duty to customers and that secret commissions can make a finance agreement unenforceable. Reporting from AutoTrader notes that the decision covers agreements dating back to April 2007, which pulls in a vast number of contracts across cars, vans, and motorbikes. The ruling effectively forced the FCA to move from investigation to action.
Who is eligible
The FCA’s proposed scheme targets personal finance agreements where a discretionary commission model was used and the borrower was not properly told about it. In practical terms, that means you may have a claim if:
- You took out PCP, hire purchase, or a conditional sale agreement for personal (not business) use.
- The agreement was arranged through a dealer or broker, not directly with a bank.
- The deal was signed between April 2007 and January 2021, when discretionary commission was still permitted.
- You were not clearly informed that the broker could set or influence the interest rate and would earn more by raising it.
According to Which?, the scheme is expected to cover mainstream deals on everyday models, not just premium cars. If you financed a Ford Fiesta through a dealership on PCP, you are just as likely to be in scope as someone who bought a BMW on hire purchase. Business leases and agreements arranged directly with a lender, without a broker in the middle, are unlikely to qualify.
One important nuance: you do not need to prove that you shopped around and would have found a better rate elsewhere. The FCA’s position is that if the commission structure was discretionary and undisclosed, the agreement was unfair on its face. The burden falls on the lender to show that the deal was transparent, not on you to demonstrate that you were harmed.
What the FCA has committed to
The regulator has made several public commitments as it moves toward a formal scheme. In a statement reported by the Law Society Gazette, the FCA said it expects millions of people to receive compensation during 2026, though it acknowledged that the precise timeline depends on how quickly lenders can identify affected agreements and calculate redress.
A technical briefing published by Regulation Tomorrow in March 2026 confirmed that the scheme will include a staggered implementation period. Newer agreements, where records are more readily available, will be processed first. Older contracts, some dating back nearly two decades, will follow on a longer timeline, with the briefing suggesting up to five additional months for those cases.
The FCA has also said it wants the process to be straightforward for consumers. Rather than forcing people into drawn-out negotiations or legal battles, the plan is for lenders to proactively review agreements, calculate what is owed, and make offers that customers can accept or reject. If a borrower is unhappy with an offer, they will still be able to escalate to the Financial Ombudsman Service, which acts as an independent referee at no cost to the consumer.
The complaints pause and the 31 May 2026 deadline
Since late 2024, the FCA has paused the requirement for lenders to issue final responses to motor finance complaints. This was not a freeze on complaining. It was a freeze on responding, designed to give the regulator time to build a single, consistent scheme rather than letting thousands of cases be decided piecemeal under different standards.
That pause lifts on 31 May 2026. After that date, lenders must begin processing complaints under the new rules. Claims advisers, including Motor Finance Claims Advice, stress that drivers should not wait for the pause to end before submitting a complaint. Registering your claim now means it will be in the queue when processing resumes, and it protects your position if any future time limits are introduced.
There is no official cut-off date for new complaints yet, but the FCA has indicated that one may be set once the scheme is finalised. If you think you were affected, the safest course is to act before the rules are locked in.
How to check your deal and make a claim
You do not need a solicitor or a claims management company to do this. The FCA’s consumer guidance on car finance complaints walks you through the process, and organisations like Which? have published free template letters you can use. Here is a practical checklist:
- Find your paperwork. Dig out the original finance agreement. If you have lost it, contact the lender and ask for a copy. You are entitled to one.
- Check the finance type. Look for terms like “PCP,” “hire purchase,” or “conditional sale.” If the agreement was a personal lease or a business contract, it probably falls outside the scheme.
- Ask about commission. Write to the lender and ask whether a discretionary commission arrangement was in place on your deal. They are required to tell you.
- Look for red flags. Did the dealer steer you toward a monthly payment figure without explaining the total cost? Were you told the rate was “the best available” without evidence? Were you never told the dealer earned commission at all? Any of these could indicate mis-selling.
- Submit a complaint. Send a written complaint to the finance company, not the dealership. State that you believe a discretionary commission was used, that you were not informed, and that you are seeking redress. Keep a copy of everything.
- Avoid upfront fees. Legitimate redress under the FCA scheme will not cost you anything. Be cautious of claims firms that ask for payment before your complaint has even been assessed. If you want professional help, check that the firm is FCA-authorised and works on a no-win, no-fee basis.
If the lender rejects your complaint or you are unhappy with the offer, you can refer the case to the Financial Ombudsman Service free of charge. The ombudsman can order the lender to pay compensation and its decisions are binding on the firm.
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