The Financial Conduct Authority (FCA) has announced a redress scheme today (30 March 2026), with an estimated £7.5 billion for eligible motorists.
This follows an announcement by the FCA last October 2025, following widespread failures to disclose commission arrangements in car finance agreements.
Lenders paid commissions to dealers that were not properly disclosed to customers.
Key Facts
Two parts to the scheme
6 April 2007 – 31 March 2014 – lenders have until the end of August 2026 to implement it. This may be subject to a legal challenge – if so, redress for finance agreements after 1 April 2014 shouldn’t be delayed.
1 April 2014 – 1 November 2024 – lenders have until the end of June 2026 to implement it.
Estimated affected agreements: 12.1 million
Average payout: £829 per agreement
Estimated total compensation: £7.5 billion
Type of finance covered: Primarily Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements
Payouts: Some payouts will start later this year, with most payouts complete by the end of 2027.
Why the FCA is Launching the Scheme
The Financial Conduct Authority (FCA) found widespread failings in how car finance was sold, particularly through Discretionary Commission Arrangements (DCAs).
Under these arrangements, dealers could set the interest rate on a customer’s finance deal – the higher the rate, the more commission the dealer earned.
Crucially, this was often not clearly explained to customers.
Background: Supreme Court Ruling
The Supreme Court ruled in August 2025 that certain undisclosed commission arrangements could make finance agreements unfair.
However, the Court upheld one landmark case (“Johnson case”) confirming that undisclosed or excessive commissions can make a finance agreement unfair.
That ruling gave the FCA legal clarity to design a redress scheme covering millions of similar cases without clogging up the courts or the Financial Ombudsman Service (FOS).
Who Is Eligible?
The scheme will cover agreements where:
- A discretionary commission arrangement (DCA) was in place. This allowed the broker to adjust the interest rate to receive a higher commission.
- High commission was paid (at least 39% of total credit cost and 10% of the loan).
- A contractual tied arrangement, where the dealer claimed to “search a panel” but in fact had an exclusive agreement with one lender.
Consumers whose cases mirror the Johnson ruling – with especially excessive commissions – could receive full repayment of commission plus interest based on the Bank of England base rate +1%, with a minimum 3% rate.
You won’t be eligible if you have already been compensated for the same complaint.
Who is not eligible?
- Personal Contract Hire agreements (PCH) – leasing without a chance to own the vehicle
- 0% finance agreements – (no interest, no commission)
- Static caravans (these are not classed as motor vehicles as they do not have an engine)
- The commission was £120 or less for agreements beginning before 1 April 2014 and £150 or less from that date.
How the Scheme Will Work
The FCA aims to make the process simple, free and automatic wherever possible.
- If you have already complained:
You will be automatically included and assessed in the scheme unless you choose to opt out (for instance, if you plan to take legal action). - If you haven’t complained yet:
Your lender will contact you within six months of the scheme starting, inviting you to opt in. - If you don’t hear anything:
You will have up to 31 August 2027 to contact your lender and make a claim.
How Much Could You Receive?
The FCA estimates that most consumers will get back about £829 per agreement.
This approach is based on detailed analysis of millions of loans and aims to make the process fast, consistent and evidence-based.
Some consumers who paid particularly high commissions could receive significantly more, including a full refund of commission plus interest.
Nikhil Rathi, chief executive of the FCA, said:
Speaking after the Financial Conduct Authority (FCA)’s announcement, its CEO Nikhil Rathi says millions of people will receive their compensation in 2026.
He says it will put £7.5 billion “into people’s pockets”, with 12.1 million agreements eligible for compensation and the average payment being £829 per agreement.
The scheme is the “quickest, fairest, most cost effective way” for consumers to get compensation, Rathi says, adding it is “not especially likely” that consumers could get more compensation if they were to take their claims to court.
Those who have already complained will get their payments sooner, he says, encouraging eligible consumers to lodge their complaints now and advising that this does not require using a law firm or claims management company.
Impact on the Finance Market
The FCA expects the scheme to minimise disruption to the motor finance market while providing timely and fair compensation.
What are Discretionary Commission Arrangements (DCAs)?
The Financial Conduct Authority (FCA) began looking at this in 2017 amid concerns about Discretionary Commission Arrangements (DCAs), where sales staff could adjust the interest rate on car loans.
Under this model:
- Dealers could adjust the interest rate offered to the customer
- The higher the interest rate, the higher the commission they received
- The consumer was unaware of this financial incentive
This created a conflict of interest that the FCA found was unfair. DCAs were banned from 28 January 2021.
The FCA banned DCAs in January 2021, citing it would save motorists an estimated £165m a year.
How to Check and Complain to Claim Compensation
Contact your lender to find out if your finance agreement included a Discretionary Commission Arrangement (DCA) and ask what the interest rate was.
Have the following ready (especially for older agreements).
- Finance agreement reference number
- Car registration details
- Name and date of birth
- Previous addresses (if you have moved)
- Credit report reference details
Once your complaint is logged, that’s all you need to do.
The FCA has published free complaint templates on its website – there’s no need to pay anyone to do this for you.
Avoid Claims Management Companies
Do not use a Claims Management Company. It’s easy to do it all yourself and keep all the money you are owed. Their success rate is only 8% -v- 42% for consumers.
You can easily do it yourself for free – the Financial Ombudsman Service clearly explains the process. There are free templates and step-by-step guides available online.
You are more likely to win your case and keep all of the compensation you are entitled to.
Claims Management Companies have caused immense harm and disruption to the car finance industry by not operating in a genuinely compliant customer-focused way. They have abused the process and should be held accountable.
If you think your finance agreement qualifies, submit a complaint.
If it’s rejected, ask for a ‘deadlock letter’ (final response), so you can escalate it to the Financial Ombudsman Service (FOS).
My View
This latest update will come as a huge disappointment to many consumers who believed they were misled and stood to receive a higher payout.
Consumers will now have a pathway to secure compensation without relying on CMCs, and lenders are required to prepare for a structured redress scheme.
Ultimately, the costs of mis-sold or compensated finance are likely to be passed on to consumers in the long term. This could restrict choice and lead to more expensive finance agreements as lenders seek to recoup losses.
If consumers were happy with the deal they received, should they have the right to retrospectively open a claim? My view is that the DCA element is suspect. Full disclosure of commission payments should have been clearly stated in the Key Terms of the finance agreement.
Others might argue that consumers should understand how the industry operates and commission arrangements are part of the business model.
What are your thoughts on this compensation scheme? Are you affected?
