Every Car Finance Customer Before November 2024 Could Be Owed £830 by the FCA

• The Financial Conduct Authority’s £9.1 billion redress scheme covers car finance agreements taken out between 6 April 2007 and 1 November 2024, with around 12.1 million agreements eligible for a payout.
• The average payment works out at about £830 per agreement, but a legal challenge to the scheme has a hearing listed for February 2027, which could delay when the money actually lands.
• Drivers do not need a claims company to join the scheme, and firms that charge for the service can take up to 36 percent of the payout in fees.

Why Your Payout From Britain’s £9.1 Billion Car Finance Scandal Might Not Arrive Until 2027

If you financed a car, van, motorbike or campervan with a hire purchase or PCP agreement between 6 April 2007 and 1 November 2024, the Financial Conduct Authority says you could be owed money. The regulator has finalised a redress scheme worth an estimated £9.1 billion, covering around 12.1 million agreements. The average payout works out at roughly £830 per agreement, though the amount depends on how much commission the dealer or broker earned for arranging the loan and how long the agreement ran.

The catch is timing. Lenders do not have to work out or pay a penny until a legal challenge to the scheme finishes, with a hearing listed for 16 to 26 February 2027. If the scheme survives that challenge, the FCA expects payments to begin in 2027, not this year, which leaves millions of drivers confirmed as owed money but still waiting for it to land.

What the Scheme Actually Covers

The redress scheme applies to hire purchase and PCP agreements signed between 6 April 2007 and 1 November 2024. It does not cover personal contract hire leases, agreements already settled by the Financial Ombudsman Service or a court, cases where compensation has already been accepted, business loans, or high value agreements above a yearly threshold the FCA publishes, which was £82,000 for loans taken out in 2024. If the original borrower has died, their estate or beneficiaries can usually still claim, generally by providing a will or grant of probate.

Eligibility does not simply mean having had car finance. The test is whether a dealer or broker had one of three arrangements with the lender: a discretionary commission arrangement, where the broker could set the interest rate and earn more commission the higher it went; a high commission arrangement; or a contractual tie that limited which lenders the broker could use. Agreements are treated as fair, and therefore not eligible, if the commission paid was £120 or less on deals from before 1 April 2014, or £150 or less after that date, or if no interest was charged at all.

The final scheme is narrower than the FCA’s first proposals. A number of agreements that would have qualified under the original draft have now been excluded, which is part of why the eligible pool sits at 12.1 million agreements rather than a higher figure. The regulator estimates that if it had left the issue to work through the Financial Ombudsman Service and the courts case by case instead, the eventual cost to lenders would likely have topped £6 billion more than the scheme’s own £9.1 billion bill. That gap is a large part of the reasoning for a single, standardised process rather than letting millions of individual complaints proceed separately over several years.

Why This Happened in the First Place

The scandal stems from discretionary commission arrangements that many dealers and brokers used for years before the FCA banned them in 2021. Under these deals, the broker arranging the finance could move the interest rate up or down within a range set by the lender, and the more interest a customer paid, the more commission the broker earned. In effect, the person selling the car had a financial incentive to charge more for the privilege, usually without the customer ever being told that incentive existed. Court rulings in 2024 found that this amounted to an unfair relationship for borrowers in some cases, which pushed the dispute up through the legal system and, eventually, led the FCA to step in with an industry-wide scheme rather than leaving the matter to be settled dispute by dispute.

How Lenders Worked Out What You Owe

Compensation is based on a comparison between the interest rate actually paid and a notional fairer rate. The FCA set that comparison rate at 17 percent APR for agreements from April 2014 onwards, and 21 percent for anything earlier. Lenders add interest on top, at the Bank of England base rate plus one percentage point, with a floor of 3 percent a year, intended to reflect the time a customer has been out of pocket.

Not everyone gets the full calculated amount. The regulator estimates payouts will be capped in around one in three cases, usually where the sums involved are small or the agreement ran for a short time. That is one reason the average payout sits at £830 rather than a far higher figure: a relatively small number of long-running, high-commission agreements pull the total bill up to £9.1 billion, while most individual payments stay modest.

How to Check Whether You’re Owed Anything

Nothing needs to be done to be included in the scheme if the original lender is still trading: lenders must review eligible agreements and write to affected customers directly. Checking first can speed things up for anyone who has moved house after taking out the finance and worries a letter might go astray. Old bank statements or finance paperwork are the obvious starting point, followed by the dealership where the car was bought, or a credit file, which should list historic finance agreements by lender and date. Equifax’s Car Finance Checker tool searches commission records held by participating lenders stretching back to 2007, covering the full window the scheme applies to.

Once a lender has been identified, the FCA publishes a list of lenders on its own website with template complaint letters and contact details for each one. After a complaint is made, the lender has to confirm whether anything is owed and how much. For agreements from April 2014 complained about by 30 June 2026, that response is due by 18 November 2026. For earlier agreements complained about by 31 August 2026, the deadline is 18 January 2027. Complaints made after those dates should still get a response within five months. There is then one month to accept or challenge the offer, and anyone still unhappy can escalate to the Financial Ombudsman Service, though the time limit for doing so is set out in the lender’s own letter.

The Claims Company Trap

Joining the scheme costs nothing, and the FCA is explicit that no claims management company or law firm is needed to take part. Using one anyway can be expensive: fees can run as high as 36 percent of a payout once VAT is added, and the regulator has flagged cases of people signing up with more than one firm without realising, which can mean paying fees twice over for the same claim. Anyone who does use a claims company should ask for an itemised breakdown of its fees rather than accepting a vague percentage, and check what work the firm is actually doing that could not be done directly with a free template letter from the FCA’s own site.

Scams are circulating around the scheme too. The FCA warns that fraudsters are posing as lenders or as the regulator itself, asking people to hand over PINs, passwords or bank details to release a payment. A genuine lender or the FCA will never ask for that information by phone, text or email, and any message asking for it should be treated as fraud and reported rather than answered.

What Happens Next

If the legal challenge does not overturn the scheme, lenders have until 30 June 2026 to finish implementation work on agreements from April 2014 onwards, and until 31 August 2026 for earlier agreements, before the response-letter deadlines above take effect. Payouts are expected to follow during 2027. In the meantime, the most useful step is making sure a lender has an up to date address on file, as confirmation of any payout will be posted there, and keeping hold of any finance paperwork that can be found rather than waiting for a reminder that might never come if the original lender no longer trades under the same name.

Want more car content? Add us as a preferred source on Google to your favourites list for the best automotive news and analysis on the internet.

If you enjoyed this article, be sure to follow us on Microsoft Start.

Sources:

• Financial Conduct Authority: Car finance claims
• Financial Reporter: Tightened eligibility but higher payouts: FCA reveals final details of £9.1bn redress scheme