Why Every Driver Who Financed a Car Before 2024 Has Just Five Weeks to Claim £830

If you bought a car, van or motorbike on finance between April 2007 and November 2024, you could be owed an average of £830 in compensation. The Financial Conduct Authority confirmed its motor finance redress scheme on 30 March 2026, and the first wave closes on 30 June 2026, just five weeks away. Miss that date and you can still claim, but you will wait significantly longer to receive anything.

The scheme is the largest consumer compensation programme since the PPI scandal. Around 12.1 million finance agreements are covered. Total payouts, if 75 per cent of eligible customers claim, are expected to reach £7.5 billion. Most drivers will not need to do anything complicated to access their share: a single complaint letter to their lender is all it takes.

Why the Compensation Scheme Exists

The scheme exists because of a practice called discretionary commission arrangements, or DCAs. Between April 2007 and November 2024, many car finance dealers and brokers were allowed to set the interest rate on a customer’s PCP or Hire Purchase agreement. The higher they set it, the more commission they earned. Customers were never told this was happening. The FCA found this was unfair and unlawful, because it denied borrowers the chance to shop around for a better deal or negotiate their rate down.

The problem was not limited to small operations. The commission arrangements were widespread across the mainstream motor finance market, used by dealerships affiliated with major manufacturers and independent dealers alike. Black Horse (part of Lloyds Banking Group), MotoNovo Finance, Close Brothers, and Santander Consumer Finance were among the lenders involved.

To qualify for compensation, your agreement must fall into one of three categories. First, your dealer or broker used a discretionary commission arrangement to earn more by setting your rate higher. Second, the commission paid was particularly high: at least 39 per cent of the total cost of credit and 10 per cent of the loan amount. Third, your lender had a tied or exclusive arrangement with the dealer, meaning you had no practical access to competing finance products, unless the dealer and lender shared an obvious brand connection such as a manufacturer’s own finance arm clearly identified at point of sale.

Agreements below a certain commission threshold are excluded, as are loans in the top 0.5 per cent by value for their year, which the FCA considers high-value and more likely to involve professional financial advice.

The June 30 Deadline and What It Means

The scheme has two separate implementation periods, and understanding the difference could determine whether you receive compensation this year or next.

For agreements entered into between 1 April 2014 and 1 November 2024, the scheme’s implementation period ends on 30 June 2026. If you submit a complaint to your lender before that date, you will be placed in the first assessment wave. Under the scheme rules, lenders have three months from the end of the implementation period to tell you whether you are owed compensation and how much. Accept the offer, and payment follows within one month. For those who complain before 30 June, the realistic expectation is a decision by September and a payment by November 2026.

For older agreements entered into between 6 April 2007 and 31 March 2014, the implementation period ends on 31 August 2026. Complain before that date for the first payment wave, with decisions expected by November 2026 and payments by early 2027.

If you miss both deadlines, your lender is still required to contact you automatically if you are likely to be owed money. But that contact only has to happen within six months of the end of the relevant implementation period, meaning it may not come until late 2026 or early 2027. Taking the initiative now puts you many months ahead in the queue.

The absolute final deadline to make any claim is 31 August 2027. After that date, any entitlement expires.

How to Claim for Free Without Losing 30 Per Cent

The FCA has been forceful on this point: you do not need to pay a claims management company (CMC) or a law firm to access compensation. If you use one, you could lose more than 30 per cent of whatever you receive in fees. The regulator has already removed or amended 800 misleading adverts by CMCs, helped over 28,000 consumers exit CMC contracts without charge, and launched a joint taskforce with the Solicitors Regulation Authority, Information Commissioner’s Office, and Advertising Standards Authority to crack down on poor CMC practices.

The free process works as follows. Identify your lender, which is the finance company named in your original agreement, not the dealership. Check old paperwork, a copy of your credit report, or any correspondence you received after the purchase. Common lenders include Black Horse, MotoNovo, Close Brothers, Santander Consumer Finance, FirstRand Bank, and Barclays Partner Finance.

Once identified, write to the lender directly stating that you believe you received a finance agreement that included an undisclosed commission arrangement and that you wish to be assessed under the FCA’s motor finance redress scheme. You do not need to provide evidence at this stage. The FCA’s dedicated car finance complaints guidance is at fca.org.uk/consumers/car-finance-complaints, and a motor finance scams helpline has been launched so consumers can verify they are dealing with their genuine lender rather than a fraudster.

Scammers have already begun targeting consumers in this area. Your lender will not ask for your PIN, online banking login details, or an upfront fee to process your compensation claim. Any approach asking for these is fraudulent.

What Your Compensation Could Be Worth

Compensation under the scheme is calculated in two parts. The first element is the commission paid on your agreement. The second is an estimated loss based on a percentage discount of the interest rate you were charged. For post-April 2014 agreements, that discount is set at 17 per cent of your APR. For earlier agreements, it is 21 per cent, reflecting the greater scale of unfairness under the older DCA arrangements that were in place before the FCA tightened its rules.

In around one in three cases, the total will be capped to prevent any customer from ending up in a better position than someone who was treated fairly all along. But for those in uncapped cases, particularly on high-interest agreements where the dealer pushed the rate up significantly, the payout can be substantially higher than the £830 average.

Interest is added on top of the base compensation. The rate is the annual average Bank of England base rate plus one per cent, with a floor of three per cent in any year. For agreements stretching back to 2007 or 2008, this accumulated interest can add several hundred pounds to the final figure.

Customers who disagree with their lender’s assessment can refer the matter to the Financial Ombudsman Service, which has full oversight of whether the scheme rules have been correctly applied. The FCA has also established a dedicated supervisory team to monitor lender compliance and intervene if firms are not following the rules.

Why One Major Lender Is Already Exiting the Market

The confirmation of the scheme has already caused significant disruption in the motor finance industry. MotoNovo Finance, one of the UK’s larger lenders in the used car market, was put up for sale in April 2026 by its parent company FirstRand Bank, which publicly described the FCA’s scheme as “deeply flawed.” FirstRand intends to exit the UK motor finance market entirely.

The departure of MotoNovo does not affect customers who hold existing agreements or who wish to claim compensation. Any wind-down would be subject to FCA oversight and a regulated process for handling outstanding obligations. But it signals the scale of the financial exposure facing lenders: the FCA estimates total industry compensation under the scheme at £7.5 billion, compared to an estimated £13.5 billion if every claim were handled individually through the Financial Ombudsman or courts.

Four legal challenges to the scheme remain in progress, brought by campaign group Consumer Voice and three lenders. None of these challenges prevents consumers from submitting complaints now. The FCA has confirmed the scheme will proceed and that it does not anticipate any suspension during the legal process. The outcome of the challenges may affect the precise methodology used in some cases but is unlikely to eliminate the scheme entirely. Consumers should act before 30 June rather than waiting on a legal outcome that could take months or years to resolve.

Sources:

• FCA: Millions of car finance customers to get payouts this year
• FCA consumer car finance complaints guidance
• Auto Express: MotoNovo up for sale following redress scheme announcement
• MoneySavingExpert: Car finance reclaim guide