The financial regulatory body has provided an update for numerous motorists awaiting further information on a significant car finance compensation initiative. The Financial Conduct Authority (FCA) is presently seeking input on the specifics of a compensation program for individuals who were unfairly subjected to car finance agreements between 2007 and 2024 due to inadequate disclosure of broker commissions. Compensation may be warranted for individuals with car finance agreements involving discretionary commission arrangements (DCAs), where brokers and car dealers could boost interest rates on loans to earn higher commissions. Additionally, car finance contracts eligible for compensation may include those with high commission structures or where a broker failed to disclose an exclusive partnership with a single lender.
In a recent development, the FCA has mandated that motor finance companies commence addressing complaints two months earlier than initially scheduled. The previous deadline of July 31, 2026, has been advanced to May 31, 2026. Complaint handling for these issues has been on hold since January 2024, although firms are required to continue investigating complaints. Firms are instructed to begin issuing final responses to any motor leasing complaints from December 5, 2025, following standard complaint resolution guidelines.
The compensation scheme, expected to be launched early next year, could encompass over 14 million car finance agreements. The FCA anticipates that the majority of drivers may receive approximately £700 in compensation. The FCA emphasized the necessity of promptly addressing complaints to avoid prolonged delays, noting that a scheme is likely to be implemented with specific rules and timeframes for resolution.
Motorists were advised by the FCA not to engage legal representation or claims management firms when lodging complaints. Instead, individuals can directly contact the lender handling their car finance to submit a complaint at no cost. Those who have already filed complaints before the scheme’s initiation are projected to receive compensation sooner, with estimated payouts totaling £8.2 billion by lenders. Renowned financial expert Martin Lewis encouraged eligible individuals to submit their complaints promptly, stressing the importance of initiating the process to determine potential compensation entitlements. Lewis highlighted the significance of flagging cases early, particularly in older instances where detailed car finance records may have been deleted.