Think you鈥檙e owed money from the car finance scandal? Here鈥檚 everything you need to know
October 08, 2025 by Siobhan Doyle
Taken out car finance between 2007 and 2024? You could be owed on average 拢700 per agreement. Here鈥檚 everything you need to know about the FCA鈥檚 car finance compensation scheme.
If you took out car finance between 2007 and 2024, there鈥檚 a good chance you could get some money back 鈥 and it鈥檚 worth knowing how to go about it.
The average payout from the scheme might be around 拢700 per agreement, according to the Financial Conduct Authority (FCA). And in total, lenders could end up paying around 拢8.2bn to affected customers.
But what鈥檚 this all about? The FCA found that some car finance companies broke the rules by not being upfront about how certain deals worked. That lack of transparency meant some drivers missed out on fairer deals or ended up paying more for their car deals then they should have.
One of the biggest issues was related to commissions to the broker (in this case, your dealer). Here, a lot of companies didn鈥檛 properly tell people about these commission fees, which goes against the rules that are there to protect you.
A Supreme Court ruling in August 2025 said that while commission payments can be legal, failing to be upfront about them can sometimes be unfair 鈥 and even unlawful 鈥 in certain situations.
Following the court ruling, the FCA said it will set up a compensation scheme set to go live in early 2026. This would be a straightforward way for drivers to get what they鈥檙e owed without having to navigate complicated legal processes.
What鈥檚 more is that it would be free for consumers to access and much faster than going through the courts or the Finance Ombudsman.
Right now, a lot of people are holding back from making claims because they鈥檙e unsure if they鈥檙e eligible or how much they might get. Research shows that almost half (46%) of those aware of the issue say the rules aren鈥檛 clear enough, while 24% are put off by not knowing the potential payout. But there鈥檚 optimism too 鈥 81% of people say they鈥檇 be more likely to claim if a clear scheme was in place.
FCA boss Nikhil Rathi said it鈥檚 time for lenders to make things right: 鈥淢any car finance lenders did not comply with the law or the rules. Now we have legal clarity, it鈥檚 time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.鈥
He added that while not everyone will agree on every detail, the goal is to create a fair, efficient system that gets money to people quickly 鈥 and helps restore trust in the car finance market.
Want to learn more? This guide will show you what the scheme will look like, if you鈥檙e eligible for a refund, and what to expect along the way. Plus, we share tips on how to avoid scams when the scheme comes into play.
How will the scheme work?
If you took out a car finance agreement between 6 April 2007 and 1 November 2024, you might be due compensation 鈥 especially if you weren鈥檛 told that your lender paid commission to the broker (which is often the car dealer).
If you鈥檙e concerned you weren鈥檛 given the full picture about your car finance deal, we鈥檇 recommend you complain to your lender now if you haven鈥檛 already. Doing this early could mean you get your money back sooner once the official compensation scheme goes live.
There鈥檚 also no need to pay someone to claim for you
A big number of drivers don鈥檛 realise this: you don鈥檛 need to use a claims company or lawyer to make a claim. In fact, if you do, you could lose a chunk of any compensation you鈥檙e owed in legal fees.
Instead, you can for free using the FCA鈥檚 template letter, available on its website.
What happens once the scheme starts?
When the scheme officially begins:
- Lenders will contact anyone who鈥檚 already complained. If they don鈥檛 hear back from you within a month, they鈥檒l automatically start reviewing your case.
- If you鈥檝e already complained, you鈥檙e likely to get paid faster.
- If you haven鈥檛 complained yet, your lender will get in touch within six months of the scheme starting. You鈥檒l then have another six months to decide if you want to opt in and have your case reviewed.
- If your lender can鈥檛 find you, you鈥檒l still have a year from the scheme鈥檚 launch to make a claim directly.
- If you鈥檙e not sure who your lender was, the FCA鈥檚 website explains how to check. There鈥檒l also be a nationwide awareness campaign once the scheme launches.
Who could get compensation?
You might be eligible for a refund if you weren鈥檛 told about one or more of these arrangements between your lender and broker:
- A discretionary commission 鈥 where brokers could increase your interest rate to boost their own commission.
- A high commission deal 鈥 where commission was unusually large (for example, 35% of the total cost of credit or 10% of the loan).
- A special or exclusive tie between the lender and broker, giving that broker near-exclusive rights to offer the lender鈥檚 credit.
In rare cases, a lender may argue that even if one of these features wasn鈥檛 disclosed, it didn鈥檛 cause any unfairness. But if there鈥檚 no clear evidence about what was explained to you, the lender must assume you weren鈥檛 told.
But what if you disagree with your lender鈥檚 decision?
The FCA will keep a close eye on lenders to make sure they鈥檙e sticking to the rules.
If you think your case hasn鈥檛 been handled fairly, you can take it to the Financial Ombudsman Service.
If your complaint doesn鈥檛 fit into the three arrangements covered by the scheme, you may not be owed compensation under it 鈥 but you can still take your case to court if you believe you鈥檝e lost out.
5 tips to avoid scams
While this scheme could help many people get compensation, scammers often target such schemes to trick people into giving away personal information or money. Here鈥檚 how to stay safe when the scheme comes around.
1. Verify official communications
The FCA or your finance provider will never ask for payments upfront or sensitive details such as full bank passwords via email or phone. Always check the sender鈥檚 email address and contact the FCA directly through their official website.
2. Beware of unexpected calls or emails
Don鈥檛 trust unsolicited calls or messages claiming to be from the FCA or a claims company. Scammers often use pressure tactics to rush you into sharing information or paying fees.
3. Use official channels
Only submit claims through the FCA鈥檚 official website or approved redress platforms. Avoid third-party firms unless you鈥檙e 100% sure they鈥檙e legitimate.
4. Don鈥檛 pay to claim compensation
Genuine compensation schemes don鈥檛 charge you fees to apply or receive money. Be suspicious if anyone asks for payment upfront.
5. Keep personal information secure
Never share sensitive information such as your bank details, National Insurance number, or passwords unless you鈥檙e certain of who you鈥檙e dealing with.
In a nutshell
If you鈥檝e used car finance, it鈥檚 worth checking whether you could be owed compensation. Start by making a complaint directly to your provider 鈥 you can do it yourself, for free. Keep an eye out for the FCA鈥檚 compensation scheme next year, which could make the process even easier.
Got questions or want to know more? The FCA and the Financial Ombudsman Service have plenty of resources to help you along the way.
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