Car finance compensation: where the FCA scheme stands and how to claim for free

Car Tips/Hacks10/28/2026

Car Finance Compensation Scheme - Latest Update & How to Claim | Rooster

If you took out car finance between April 2007 and November 2024, you may be owed compensation because the dealer’s commission was not properly disclosed. The Financial Conduct Authority (FCA) has set up an industry-wide compensation scheme, with an estimated average payout of £830 per agreement. But payments are on hold: the scheme is being challenged in court, and the main hearing is not until 16 to 26 February 2027.

This guide explains who qualifies, where things stand, what to do now and how to avoid paying a claims firm for something you can do yourself for free.

Last updated 27 October 2026. This is a fast-moving story; information comes from the FCA, Which? and MoneySavingExpert (see the sources at the end).

Key takeaways

The scheme covers car, van, motorbike and campervan finance taken out between 6 April 2007 and 1 November 2024.
It covers hire purchase and PCP deals where commission was not properly disclosed. Leases (PCH) are not included.
The FCA estimates an average payout of £830 per eligible agreement.
Parts of the scheme were suspended in July 2026 after legal challenges. The main hearing is set for 16 to 26 February 2027.
Until the case is decided, lenders don’t have to calculate or pay compensation.
You can complain to your lender for free. You don’t need a claims firm.

What is the car finance scandal about?

For years, many car dealers and brokers earned commission from lenders when they arranged finance. Under “discretionary commission arrangements” (DCAs), the dealer could set a higher interest rate to earn more commission, often without the customer knowing. The FCA banned DCAs from 28 January 2021.

After a Supreme Court ruling in 2025, the FCA decided that some of these deals were unfair where commission was not properly disclosed, and set up a redress scheme. It published final rules on 30 March 2026.

Who is eligible?

You may be eligible if all of these apply:

You took out finance between 6 April 2007 and 1 November 2024
It was hire purchase or PCP on a car, van, motorbike or campervan
It was for personal use (or as a sole trader or small partnership borrowing under £25,000)
The lender paid commission to the dealer or broker

And you were not properly told about at least one of these:

A discretionary commission arrangement, where the dealer could raise your interest rate to earn more commission
High commission, of at least 39% of the total cost of credit and at least 10% of the amount borrowed
A contractual tie, where the broker had an exclusive or first-refusal arrangement with the lender

You can still be eligible if you have paid the finance off, sold the car or had it repossessed.

Not covered: personal contract hire (leases), genuine 0% interest deals, business loans, complaints already decided by the Financial Ombudsman or a court, and agreements where the commission was £120 or less (before 1 April 2014) or £150 or less (from 1 April 2014).

How much could you get?

The FCA estimates that around 12.1 million agreements are eligible and that the average payout will be about £830 per agreement, with around £7.5 billion paid in total. That is an average: some people will get more and some less. The FCA says your loss will be estimated as a percentage discount on the interest rate you paid: 17% for agreements from April 2014 and 21% for earlier ones. On top of that comes compensatory interest at the Bank of England base rate plus 1%, at a minimum of 3% a year. Tax may be due on the interest part.

The scheme is split into two parts by date: one for agreements from 6 April 2007 to 31 March 2014, and one for agreements from 1 April 2014 to 1 November 2024.

Where does the scheme stand now?

Four parties challenged the scheme at the Upper Tribunal: Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance, which argue it goes too far, and the group Consumer Voice, which argues payouts are too low. Other large lenders, including Black Horse, Santander and Close Brothers, said they would not challenge it.

On 2 July 2026, the Tribunal suspended parts of the scheme. While the challenges are decided, lenders don’t need to calculate or pay compensation, but they must keep preparing, identifying affected customers and handling complaints as far as they can.

On 13 October 2026, the FCA confirmed the main hearing will take place from 16 to 26 February 2027. If the scheme is upheld, payments could start later in 2027. MoneySavingExpert has warned that payments may not start until late 2027 or 2028. If the scheme were overturned, the FCA has said compensation could be delayed until 2028 or beyond, and complaints might be handled individually instead.

Dates that still apply:

By 18 November 2026: lenders should write to people who complained by 30 June 2026 about agreements from 1 April 2014, if they are not owed anything.
By 18 January 2027: the same for agreements before 1 April 2014 where the complaint was made by 31 August 2026.
Within 5 months: if you complain after those dates and are not owed anything, your lender should tell you within five months, according to the FCA.
31 August 2027: under the FCA’s March 2026 rules, the last date to complain if your lender never contacted you. Check the FCA’s site, as this could change.

How to claim for free

Find out who your lender was. This is the finance company, not the dealer. Check your paperwork, old bank statements or your credit file. Equifax offers a free car finance checker covering records since 2007. If you are stuck, ask the dealer.
Complain to the lender. Use the lender’s complaint form or the FCA’s template letter. The FCA publishes a list of lenders and how to contact them.
Wait for the response. While the scheme is suspended, you may get a “not owed” letter or nothing until the case is decided.
If you disagree, ask the lender to explain its decision, then take it to the Financial Ombudsman Service, which is free.

People who have already complained are likely to be dealt with sooner, so if you think you are eligible, complaining now makes sense.

Do you need a claims firm?

No. The scheme is designed so you don’t need one, and the FCA warns that claims firms and law firms may charge over 30% of any compensation. If you have signed up with one, check the cancellation terms: authorised firms must give you a 14-day cooling-off period.

Watch out for scams

Scammers are contacting people pretending to be lenders, claims firms or the FCA. The FCA will never ask you to transfer money or give your PIN or password. Lenders are not currently sending compensation offers under the scheme, so treat unexpected calls, texts and emails about payouts with suspicion. Check any contact against the FCA’s official lender list rather than using numbers in the message, and forward scam texts to 7726.

Frequently asked questions

Am I owed car finance compensation?

You may be if you took out HP or PCP finance between 6 April 2007 and 1 November 2024 and weren’t properly told about commission arrangements. Only your lender’s records can confirm it.

When will car finance compensation be paid?

Not until the legal challenges are resolved. The main hearing is set for 16 to 26 February 2027, so payments are unlikely before later in 2027 at the earliest.

How much is the average car finance payout?

The FCA estimates about £830 per eligible agreement, plus interest.

Can I claim if I’ve paid off my car finance?

Yes. Agreements that have been paid off, or where the car was sold or repossessed, can still be eligible.

Does the scheme cover car leases?

No. Personal contract hire (leasing) is not included. The scheme covers hire purchase and PCP.

Should I use a claims management company?

You don’t need to. Complaining to your lender is free, and the FCA warns claims firms may charge over 30% of any payout.

Sources and further reading

About this guide: Rooster is a UK car insurance provider, not a finance lender or claims firm. This guide is general information, not legal or financial advice. The scheme is subject to legal challenge, so check the FCA’s website for the latest position.

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