You May Be Owed £829 From Your Car Finance Deal And You Do Not Need A Claims Company To Get It

The Financial Conduct Authority has confirmed what is being called the biggest consumer payout since PPI. An estimated 12.1 million car finance agreements are eligible for compensation under a new redress scheme, with the average payout sitting at £829 per agreement. The total bill to lenders is expected to reach £9.1 billion, with £7.5 billion of that going directly back into consumers’ pockets.

If you bought a car, van or motorbike on finance at any point between 6 April 2007 and 1 November 2024, there is a realistic chance you are owed money. And unlike PPI, you do not need to pay a claims company a penny to get it back.

What Actually Happened

The issue centres on something called a Discretionary Commission Arrangement, or DCA. When you took out car finance through a dealership, the dealer acted as a broker between you and the lender. Under a DCA, the dealer had the power to set your interest rate higher than the lender’s base rate, and the more they inflated it, the more commission they earned. The FCA found that commission under these arrangements was high, averaging at least 39% of the total cost of credit and 10% of the loan value.

In practical terms, that means the interest rate you were quoted in the dealership was not necessarily the best rate available to you. It may have been set deliberately high so that the dealer could pocket a larger commission. You were never told this. The FCA has ruled that this practice was unfair and that consumers who were affected are entitled to compensation.

The scheme covers all regulated motor finance agreements that involved a DCA during the eligible period. That includes Hire Purchase, Personal Contract Purchase (PCP) and Conditional Sale agreements arranged through a broker such as a car dealership. It does not cover agreements where you went directly to a bank or lender without a broker involved.

Who Is Eligible

You may be eligible if you took out car finance through a dealership or broker between 6 April 2007 and 1 November 2024 and the agreement included a discretionary commission arrangement. That covers the vast majority of dealer-arranged finance during that period, as DCAs were the industry standard until they were banned by the FCA in January 2021.

You do not need to still own the car. You do not need to still be making payments. You do not need to have the original paperwork. If the agreement existed during the eligible window and involved a DCA, you have a potential claim.

There are some exceptions. If the commission earned by the broker was £150 or less on agreements from 1 April 2014 onwards, or £120 or less on earlier agreements, the FCA considers that level of commission unlikely to have influenced the broker’s behaviour or your decision, and no payout will be due.

How Much You Could Get

The FCA estimates the average payout at £829 per eligible agreement. However, the actual amount will vary depending on the size of the loan, the length of the agreement, the interest rate charged and the commission earned by the broker. Some consumers with larger loans or longer terms may receive significantly more.

The compensation calculation is based on returning you to the position you would have been in had the DCA not been used to inflate your interest rate. That means a refund of the excess interest you paid, plus compensatory interest on top.

If you had multiple finance agreements during the eligible period, each one is assessed separately. A driver who financed three cars through dealerships between 2010 and 2020, for example, could have three separate claims.

The Timeline

This is where the brief gets important. The scheme does not work like PPI where you submit a claim and wait. The FCA has placed the obligation on lenders to identify affected customers and pay them.

Here is how the timeline works:

If you have already complained to your lender: Firms have until 30 June 2026 to complete their implementation for agreements starting from 1 April 2014, and until 31 August 2026 for earlier agreements. After those dates, they have three months to tell you whether you are owed compensation and how much. That means responses for most existing complaints should arrive between September and November 2026.

If you have not complained: Lenders have six months after the implementation deadline to contact you proactively and invite you to join the scheme. For post-2014 agreements, that means you should hear from your lender by the end of 2026. For pre-2014 agreements, by the end of February 2027. Once contacted, you have six months to respond and join the scheme.

If you do nothing at all: Your lender should still contact you if their records show you had an eligible DCA agreement. However, complaining now speeds the process up and puts you in the earlier queue for assessment.

How To Claim Without A Claims Company

You do not need to pay anyone to make this claim for you. Claims management companies will take a percentage of your payout, typically 25% to 40% plus VAT, for doing something you can do yourself in under ten minutes. On an £829 average payout, that is £200 to £330 handed over for no reason.

To complain directly, contact the lender who provided your finance. This is the finance company listed on your agreement, not the dealership. If you do not remember who the lender was, check old bank statements for the monthly payment or contact the dealership where you bought the car and ask who financed it.

Your complaint should state that you believe you were subject to a discretionary commission arrangement and that the interest rate on your agreement was set higher than necessary so the broker could earn additional commission. You do not need legal language. A simple statement that you want to be assessed under the FCA motor finance redress scheme is sufficient.

MoneySavingExpert has a free reclaim tool that generates a complaint letter for you and submits it directly to your lender. It costs nothing and takes a few minutes to complete.

The Legal Challenges

Three lenders have launched legal challenges against the FCA’s redress scheme. The financial services arms of Volkswagen and Mercedes-Benz, along with Credit Agricole’s car finance division, are appealing the scheme’s design. The Finance and Leasing Association, which represents the industry, initially opposed the scheme but has since dropped its opposition.

The legal challenges do not mean the scheme is on hold. The FCA has confirmed that implementation will proceed as planned while the appeals are heard. However, if the challenges succeed, elements of the scheme could be modified, which may affect the timing or scale of some payouts.

For consumers, the practical advice remains the same: complain now, get into the queue, and let the legal process play out in the background. If the scheme is upheld as designed, you will be ahead of those who waited. If elements change, you will be contacted with updated information.

What To Do Today

If you bought a car on finance through a dealership at any point between April 2007 and November 2024, you are potentially eligible. The steps are:

Contact your lender directly, or use the free MoneySavingExpert reclaim tool, and state that you wish to be assessed under the FCA motor finance consumer redress scheme. Keep a record of your complaint. Wait for a response within the timelines above. Do not pay a claims company to do this for you.

The £829 average figure will not apply to everyone. Some will receive more, some less, and some will be told their agreement did not involve a DCA. But given that 12.1 million agreements are in scope, the odds of having at least one eligible deal are high for anyone who financed a car through a dealer in the last 17 years.

Sources:

• FCA, millions of car finance customers to get payouts this year
• FCA Policy Statement PS26/3, motor finance consumer redress scheme
• FCA, confirms motor finance redress scheme
• MoneySavingExpert, car finance free reclaim tool
• GOV.UK, FCA motor finance redress scheme