Millions of people across the UK who used car finance could still be entitled to compensation after the Financial Conduct Authority (FCA) confirmed a nationwide redress scheme for customers who were treated unfairly through hidden commission arrangements. While average payments are estimated at around £829 per eligible agreement, the process has become more complicated after legal challenges temporarily paused parts of the scheme earlier this month.
Consumer finance expert Martin Lewis has continued to encourage drivers to complain directly to their lender rather than waiting to be contacted. His advice is based on the FCA’s rules, which give priority to people who have already submitted a complaint once the scheme resumes.
If you bought a new or used vehicle using finance between 2007 and 2024, it may be worth checking your agreement now. The FCA says millions of customers could qualify for compensation if they paid more because important commission information was not properly disclosed.
Why Martin Lewis says drivers should complain now
Martin Lewis has repeatedly warned that many motorists may never realise they were affected unless they take action themselves. Although lenders will eventually contact many eligible customers, not everyone may be easy to trace, particularly if addresses, email accounts or phone numbers have changed since the finance agreement was signed.
Submitting a complaint directly to the lender keeps your place in the process and avoids paying unnecessary fees to claims management companies or solicitors. The FCA has also advised consumers to use its free complaints process rather than paying a percentage of any future compensation.
What the investigation is about
The compensation scheme stems from concerns over commission arrangements used in the UK motor finance market. In many cases, dealers or brokers received commission linked to the interest rate charged on a customer’s loan.
Known as discretionary commission arrangements (DCAs), these deals created an incentive for some brokers to increase borrowing costs because a higher interest rate generated a larger commission payment. The FCA banned DCAs in January 2021 after identifying conflicts of interest that could result in consumers paying more than necessary.
Following court decisions on undisclosed commission practices, the regulator introduced an industry-wide compensation scheme covering finance agreements entered into between April 2007 and November 2024. The final scheme also includes certain high-commission and undisclosed commission arrangements beyond DCAs.
Who could qualify for compensation
The FCA estimates that around 12.1 million finance agreements could fall within the scheme, although eligibility depends on the individual circumstances of each agreement. Average compensation is expected to be about £829, but payments will vary depending on how much extra interest was paid.
You may be eligible if your agreement involved:
- Discretionary commission arrangements (DCAs)
- High commission structures that significantly increased borrowing costs
- Undisclosed commercial relationships between the dealer and lender that affected your finance agreement
Some agreements, including certain interest-free finance deals, may fall outside the scheme because the commission arrangements worked differently.
How to make a claim
The FCA recommends complaining directly to the finance company that provided your loan, not the dealership where you purchased the vehicle.
The complaint process is free, and consumers can still take their case to the Financial Ombudsman Service if they disagree with the lender’s final response.
If you are unsure which lender provided your car finance, gather any old finance agreements, bank statements or purchase paperwork before submitting your complaint. Keeping these records together can make it easier for the lender to trace your agreement. If you’re following other financial rule changes, you can also read about the new UK bank account closure rules requiring 90 days’ notice.
Latest update on payment timings
When the FCA announced the scheme earlier this year, firms were expected to begin processing complaints after implementation periods ending in June and August 2026. However, the timetable has changed following legal challenges from several lenders and industry groups.
On 2 July 2026, the Upper Tribunal agreed to temporarily suspend parts of the compensation scheme while legal proceedings continue. During this period, lenders must continue preparing for the scheme, but they do not currently have to calculate or pay compensation until the court process is resolved.
The FCA has stressed that consumers should still submit complaints if they believe they were affected because doing so could help them receive compensation sooner once the legal issues are settled.
Why the legal challenge matters
Several lenders have argued that the FCA’s industry-wide approach is unlawful and that compensation should instead be assessed individually. Consumer campaign groups have also challenged parts of the scheme, although from the opposite perspective, arguing that some customers should receive even higher payouts.
The regulator maintains that a single nationwide scheme remains the quickest and fairest way to resolve millions of complaints while avoiding years of costly litigation similar to previous financial mis-selling scandals.
The compensation programme comes at a time when Britain’s financial sector is undergoing wider changes. Many consumers are also adapting to reduced face-to-face banking services as major lenders continue restructuring their branch networks. You can find more details in our report on Lloyds’ plan to close 95 more UK bank branches.
For now, motorists do not need to pay anyone to start a claim. The FCA’s advice remains unchanged: complain directly to your lender, keep copies of your paperwork and wait for further updates while the legal process continues.
The complaint process is free, and consumers can still take their case to the Financial Ombudsman Service if they disagree with the lender’s final response. The FCA has published detailed guidance on eligibility, complaints and the redress process on its official motor finance redress scheme page.
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