MILLIONS of drivers entitled to hundreds of pounds of car finance compensation are set for payouts at the end of next year, as the Financial Conduct Authority (FCA) pushed back a key deadline.
Motor finance firms are expected to pay £8.2billion for hiding important information, leaving customers unable to negotiate or find better deals, and in some cases, paying more for loans.
The financial watchdog has been consulting on an industry-wide scheme and has now extended a deadline for responses to the scheme as lenders and consumer groups said they needed more time.
The original consultation deadline was November 18, but it has now been pushed back to 5pm on December 12.
The final report is expected to be published in early 2026, either in February or March.
Rules for payouts will be published at the same time and the scheme will begin.
The FCA has indicated that people who have already complained should be compensated within nine months and so should start to receive payouts before the end of 2026.
However, the watchdog also stressed that half of those eligible for compensation haven’t claimed yet due to confusion, but 81% say a clear scheme would encourage them to act.
Around 14million motor agreements taken out between April 6, 2007 and November 1 2024, could be due for a payout.
The FCA previously said it wants to make the process simpler and fairer for those owed money and that’s why it’s now consulting on industry industry-wide redress scheme.
Motor finance firms are expected to pay out an average £700 to those wronged but many could be in line for payouts worth thousands.
Consumer rights expert, Martyn James told The Sun: “The FCA has estimated that over 14 million loans – just under half of all car finance deals over the last 15 years and potentially even longer – may be eligible for compensation, so that could mean long waits for people at the back of the queue.
“The 4 million who have already complained will be assessed first, but you can register your complaint now to help speed things up.”
“There are loads of ways to do this – just don’t pay a claims manager to do it for you. You’re throwing your money away.
“The free Consumer Voice service has a full guide and template complaint letter if you don’t know where to start. But there are many other options out there to help you find your lender and make a complaint.”
In a statement, the FCA said: “It’s important we receive as much evidence as possible on specific concerns through the consultation, as well as alternative suggestions if respondents don’t agree with our proposals.
“We’ll consider all the evidence and ideas received before taking final decisions.
“At the same time, we’ve heard feedback – from lenders and some consumer and dealer representatives – that analysis of the extensive market wide data will take time, as will ensuring everything is in place so any scheme runs smoothly.
“We’re therefore extending the consultation deadline until 5pm on 12 December.
“We continue to welcome and encourage responses before then, including on those consultation questions that may take respondents less time to answer.”
Richard Pinch, Senior Risk Director at leading independent financial services consultancy Broadstone, told The Sun: “The compensation scheme set out in the consultation paper will likely have a much greater impact than the sector expected and it appears the FCA have listened to lender’s calls for more time.
“For example, it is clear that collecting and analysing market data is already proving to be a challenging exercise for lenders, demonstrating the immense complexity of implementing such a compensation scheme.
“The consultation has provoked concern throughout the motor finance market and it is likely that lenders and other firms representing the market will request significant changes to be made to the final rules which are now estimated to be published towards the end of Q1 2026.
The FCA announced plans for a redress scheme in August, even after the Supreme Court overturned a ruling that accused companies of failing to disclose “hidden” commission payments to borrowers.
How to check if you’re owed compensation
If you are unsure whether you might be eligible for a payout, do some quick checks.
Look at your contract to see what type of finance agreement you had.
The paperwork should indicate if you took out a personal contract purchase or hire purchase agreement.
If you did, and it was after April 2007, then you could be eligible.
Consumer rights group Consumer Voice also has a handy tool on its website, which you can use for free to check if you could be in line for a payout.
You could also be eligible to make a claim if commissions were very high — 35 per cent of the credit cost or ten per cent of the loan amount — or if lenders had secret deals with brokers that limited your options without your knowledge.
The amount you could get depends on your contract and which rule has been broken.
But the vast majority of drivers would be in line for around 17 per cent of the interest they paid.
So, for every £1,000 of interest charged, you would get back £170.
How to claim
Log a claim now with your lender. You can find a free template letter on the FCA’s website.
Crucially, if a lender cannot find your contract to determine whether yours had a clause that means you are due compensation, it will still have to pay you.
Those who apply as soon as possible will be first in line for payouts.
Who will get compensation?
Drivers who took out personal contract purchase (PCP) or hire purchase agreements before between April 6 2007 and November 1 2024 where commotion was payable by the lender to the broker.
You will only get compensation if your lender didn’t tell you about one of three arrangements:
- A discretionary commission arrangement (DCA): This is where the broker (e.g., the car dealership) had the power to adjust the interest rate offered to the customer. A higher interest rate would result in a higher commission for the broker, which the customer ultimately paid for without being informed of this incentive.
- A high commission arrangement: The FCA has defined this as a situation where the commission paid to the broker was equal to or greater than 35% of the total cost of credit and also equal to or greater than 10% of the loan amount. The failure to disclose a commission of this magnitude is considered unfair.
- A contract tie: This refers to an agreement between the lender and the broker that gave the lender exclusivity or a right of first refusal, limiting the customer’s options for credit without their knowledge.
Anyone who wasn’t told about these arrangements you should complain now.
The FCA said that drivers do not need to use a claims management firm or law firm to make a claim.
