FCA Car Finance Compensation Scheme Delayed by Legal Challenges Until at Least 2027

Legal action has partly suspended the £9.1 billion motor finance redress scheme, meaning the 12.1 million eligible customers — including many in Kent — won’t see compensation before 2027 at the earliest.

Around 12.1 million car finance agreements are now eligible for compensation under the Financial Conduct Authority’s motor finance redress scheme, covering contracts taken out between 6 April 2007 and 1 November 2024 where lender-to-broker commissions were not properly disclosed to customers. The figures show the total cost to lenders is estimated at £9.1 billion, with an average payout of about £829 per mis-sold agreement — though that figure will vary depending on individual circumstances.

But legal challenges from multiple parties, including consumer advocacy organisation Consumer Voice and some finance firms, have forced the FCA to partly suspend key parts of the scheme. Lenders are currently not required to calculate or pay compensation, or even contact eligible customers, until tribunal proceedings conclude. Hearings before the Upper Tribunal are not expected before late 2026, meaning no payments will arrive before 2027 — and if the scheme is struck down and redesigned, that could slip to 2028 or later.

FCA chief executive Nikhil Rathi, speaking before House of Commons committees, said the regulator remains focused on securing fair compensation for consumers as quickly as possible.

The scheme responds to widespread concerns about discretionary commission arrangements, where brokers — often car dealers — could increase a customer’s interest rate to earn higher commission, without telling the customer. The FCA tightened eligibility after consultation: an earlier figure of 14.2 million agreements, representing around 44 per cent of all motor finance deals since 2007, was reduced to 12.1 million after excluding agreements with minimal commission, zero APR structures, or cases where lenders can show no actual loss to the customer despite non-disclosure.

The £9.1 billion total is already well below some earlier market estimates. Analysts had put potential motor finance liabilities at up to around £44 billion before key court rulings, and Consumer Voice argues the scheme leaves too many people short-changed. Some lenders and finance firms, meanwhile, have raised concerns about retrospective liability and the FCA’s methodology — so the tribunal faces pressure from both directions.

For Kent residents who took out car, motorbike or van finance during the eligible period, the practical effect is a wait. Those who’ve already complained to their lender remain within the scheme’s scope if it’s upheld, but won’t receive payments before 2027. The FCA advises consumers to complain directly to their lender using its guidance and template letters, rather than going first to claims management companies or law firms.

Key information

• To make a claim: Complain directly to your lender using FCA guidance and template letters — search for “motor finance mis-selling” on the FCA’s official website
• If unhappy with your lender’s response: The Financial Ombudsman Service handles motor finance complaints where consumers are dissatisfied with redress decisions
• If you used a claims management company or law firm: Complaints about their conduct can go to the Claims Management Ombudsman or Legal Ombudsman respectively
• Timing: No compensation payments are expected before 2027; extended complaint deadlines are currently envisaged into 2027, subject to tribunal outcomes