The Financial Conduct Authority (FCA) has just launched a public consultation on what could become one of the largest consumer redress programmes in UK history. The proposed scheme aims to return billions to drivers who were sold car finance deals tainted by hidden commissions and unfair practices between 2007 and 2024.
If approved, the scheme could see more than 14 million car finance agreements reviewed, with average payouts of around £700 per agreement and total industry costs exceeding £10 billion.
But beyond the headlines, what does this mean for consumers?
Why the FCA Is Acting Now
For years, many car finance customers were kept in the dark about how brokers and dealerships were paid. Under so-called discretionary commission arrangements (DCAs), brokers could increase a customer’s interest rate to earn more, often without the customer’s knowledge.
The FCA outlawed DCAs in 2021, but the damage was already done. A surge of complaints and a landmark Supreme Court ruling in Johnson v FirstRand (2025) confirmed what many suspected: millions of these agreements may have breached the Consumer Credit Act by creating unfair relationships between lenders and borrowers.
With nearly four million complaints already filed and inconsistent outcomes across firms, the FCA now wants a single, structured way to deliver compensation, instead of leaving millions of consumers to fight individual battles through courts and ombudsman cases.
Who Could Be Eligible
The proposed scheme would cover regulated car finance agreements from 6 April 2007 to 1 November 2024 in which a commission was paid by the lender to the broker.
The FCA estimates that around 44% of all car finance deals in that period could fall within scope. The focus will be on cases involving:
- Hidden or excessive commissions (typically ≥ 35% of the cost of credit or ≥ 10% of the loan).
- Undisclosed contractual ties between lenders and brokers.
In serious cases, consumers could recover the full commission amount plus interest. In others, a formula based on typical overpayments would apply.
The Scale of the Issue
According to the FCA’s economic analysis, the potential cost of compensating drivers could be enormous. Even under conservative assumptions, with around 70% of eligible consumers taking part, the total amount of redress may reach approximately£6.8 billion.
If participation rises to 85%, that figure could climb to about £8.2 billion, and in a full take-up scenario, payouts may exceed £9.7 billion.
On average, that equates to around £700 per qualifying agreement, though some drivers could receive significantly more depending on their individual circumstances. When operational and administrative costs are included, the total financial impact on the motor finance industry may surpass £11 billion, placing this among the largest consumer compensation exercises since the PPI scandal.
How Compensation Would Work
If the FCA’s proposed scheme is approved, lenders will be required to contact affected customers directly and review their finance agreements.
- Anyone who has already made a complaint will automatically be included, unless they choose to opt out.
- Customers who haven’t complained yet will be invited to opt in once the scheme begins.
- Payments are expected to include interest at the Bank of England base rate plus 1%.
While lenders will handle the administration of the scheme, the process and calculations can be complex, especially where commission records are unclear or agreements are missing. That’s why many consumers choose to work with specialist firms.
What You Should Do Now
The FCA’s consultation on the proposed compensation scheme runs until 18 November 2025, with final rules expected in early 2026. No payments will be made until the proposal is officially approved, but there are important steps you can take today to make sure you don’t miss out.
- Check whether your car finance could be affected: If you took out a hire purchase (HP) or personal contract purchase (PCP) agreement between 2007 and 2024, there’s a strong chance a commission was built into your deal, often without being disclosed.
- Keep hold of any paperwork: Loan agreements, emails, and dealership documents can help confirm whether a commission was involved. Even if you no longer have everything, we can often trace the details for you.
- Stay alert for any contact from your lender: Once the scheme is approved, lenders must contact affected customers directly. Read any letters or emails carefully. Opting out could prevent you from receiving a payout later. If you are unsure, you should contact our team.
We’re already reviewing finance agreements and monitoring the FCA process closely.
If your car was financed through a broker or dealership between 2007 and 2024, we can help you understand whether you qualify and ensure your claim is ready when the scheme opens.
Check your eligibility today and take the first step towards reclaiming what you’re owed.
