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Millions of drivers who were mis-sold a car loan have learnt they are eligible for an average payout of £830 after the finance watchdog shared its final plans for an industry-wide scheme.
A final decision on the long-awaited programme was published by the Financial Conduct Authority (FCA) on Monday afternoon.
The regulator set out draft plans last year but made several changes after receiving more than 1,000 responses to its consultation.
Under the latest proposals, the scheme will cover car finance agreements taken out between April 6, 2007 and November 1, 2024.
In a statement released after the market closed on Monday, the regulator said it had tightened eligibility so that only those treated unfairly receive compensation.
The FCA says around 12.1 million deals were unfair and therefore eligible for compensation, adding that the threshold for high commission cases had slightly risen.
The estimated total bill to firms is down from £11bn to £9.1bn.
A ruling by the Supreme Court in August 2025 found in favour of the finance companies in two of the cases under consideration, narrowing the scope of who can claim compensation.
Nikhil Rathi, chief executive of the FCA, said: “We’ve listened to feedback to make sure the scheme is fair for consumers and proportionate for firms.
“It will put £7.5bn back into people’s pockets.
“Now we need everyone to get behind it and ensure millions get their money this year.
“Payouts should not be delayed any longer, especially as household bills come under greater pressure.
“Delivering compensation promptly also gives lenders the chance to rebuild trust, and means we can draw a line under the past and support a healthy motor finance market for the future.”
Are you eligible?
The compensation scheme will apply to some 12.1 million unfair motor finance deals – down from 14.2 million at the consultation stage.
The FCA has said car finance companies broke the rules by not disclosing information, which prevented consumers from being able to find better deals elsewhere or negotiate, with some paying more for their loan.
The scheme covers motor finance agreements taken out between April 6, 2007 and November 1, 2024, where commission was payable by the lender to the broker.
According to the FCA, people would only be able to get compensation if they were not told details of at least one of three arrangements:
- A discretionary commission arrangement, which allowed the broker to adjust the interest rate the customer would pay to obtain a higher commission.
- A high commission arrangement (39% of the total cost of credit and 10% of the loan).
- Contractual ties that gave a lender exclusivity or a right of first refusal, except where the lender can prove there were visible links with the manufacturer and dealer.
How much compensation is available?
According to estimates by the FCA, people are set to receive around £830 per agreement on average, with lenders paying out a possible £7.5bn into the scheme.
Non-redress costs are estimated to be £1.6bn, taking the likely total bill to firms to £9.1bn.
When and how can you get the money?
A document template for making a complaint can be found on the regulator’s website. STV’s Martin Lewis also has a free reclaim tool and guide available here.
Lenders will contact those who have already complained when the scheme goes live. The FCA has said those who have already complained before this point are likely to receive compensation faster.
There will be a short implementation period so firms can prepare. This will be up to:
- 30 June 2026 for loans taken out from 1 April 2014.
- 31 August 2026 for those agreed earlier
Firms will only have to contact people who haven’t complained if they are potentially owed money or those who are timed out of the scheme.
They will have six months from the end of the relevant implementation period to do so.
Consumers must respond within six months if they wish to join the scheme. Those not contacted can still complain to their firm by August 31, 2027.
Rachael Jones, director of automotive finance, Autotrader, said: “We support this pragmatic and proportionate approach from the FCA that strikes the right balance between ensuring robust protection and transparency for consumers, while underpinning the stability of an automotive sector that contributes billions to the UK economy every year.
“It’s vital that this scheme doesn’t inadvertently impact a market that has adapted and is now working well for consumers.
“Modern car buyers expect transparency and choice and we’ve long made finance details highly visible on more than 300,000 vehicles advertised on Autotrader to help build consumer confidence and trust.
“Most buyers rely on finance to fund their next car purchase and so it is vital this sector can continue to help them access the vehicles they want.”
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