If you’ve heard about the car finance scandal and are wondering whether you’re affected, you’re not alone. Thousands of people across the UK are asking the same questions about eligibility, compensation amounts, and what steps to take next. Here’s what you need to know.
Am I Eligible for Compensation from the Car Finance Scandal?
Not everyone who took out car finance will be owed compensation, but you might be eligible if your agreement included certain hidden arrangements that weren’t properly disclosed to you.
The Financial Conduct Authority (FCA) has identified three specific factors that likely mean you’re due compensation:
- Discretionary Commission Arrangements (DCAs)
This is where the car dealership had the power to increase the interest rate on your loan to earn themselves more commission. Essentially, they could make your loan more expensive to boost their own earnings, without you knowing.
- High Commission Arrangements
Your agreement may qualify if the commission paid was equal to or greater than:
- 35% of the total cost of credit, AND
- 10% of the loan amount
Example calculation: Let’s say you borrowed £10,000 for a car, and the total interest you paid over the loan term was £3,000 (making the total cost of credit £3,000).
- The commission would need to be at least £1,050 (35% of £3,000) AND at least £1,000 (10% of £10,000) to qualify as high commission
- In this case, if the commission was £1,100, it would meet both thresholds and likely qualify
- Tied Arrangements
This is where the car dealership had an exclusivity agreement or gave a particular lender first right of refusal, meaning your finance was always going to come from that specific lender, but this wasn’t made clear to you.
Important Points to Remember
These three factors come from a Supreme Court judgment involving a customer called Mr. Johnson, where the court ruled his arrangement with his lender was unfair. The FCA estimates that around 14.2 million agreements since 2007 could be affected, representing roughly 44% of all motor finance deals during that period.
Just having a car finance loan, or even knowing that commission was paid between the dealership and lender, doesn’t automatically mean you’re eligible for compensation. You need to have experienced one of the three specific factors outlined above.
It’s also worth noting that while other factors could potentially make your agreement unfair, cases based on the three factors identified by the Supreme Court and the FCA are much more likely to succeed.
How Much Compensation Might I Receive, and When Will Payments Arrive?
The FCA is proposing a compensation scheme where customers would receive an average of around £700 per car finance agreement. This means:
- Some customers will receive more than £700
- Some will receive less than £700
- If you had multiple finance agreements, you could receive compensation for each one
Important context:
This £700 figure is still an estimate. The FCA’s scheme is currently under consultation and review, so these details could change.
The amount you receive through the proposed scheme might be different from what you could get if you took your case to court through a law firm. Court cases involve their own costs and processes, and outcomes can vary.
When Will Payments Start?
The regulator introduced a pause on these cases while they finalised exactly how compensation claims should be handled. The FCA has now confirmed that the pause on motor finance complaints will be lifted on 31 May 2026.
The final rules for the compensation scheme are expected to be published in February or March 2026. If the scheme goes ahead as proposed, compensation payments could begin from mid-2026 onwards, depending on how quickly lenders can process claims once the pause is lifted.
It’s worth noting that the FCA is actively encouraging lenders to progress complaints now, so they’re ready to respond once the pause ends. This means some customers might receive responses sooner than the 31 May 2026 deadline, particularly for cases that fall outside the proposed scheme.
What About Unaffordable Lending Claims?
If your complaint is that the car finance was unaffordable and shouldn’t have been given to you in the first place, that’s a different type of claim from commission complaints.
For unaffordable lending, compensation typically involves refunding all the interest and charges on the agreement, so you’d only pay for the car itself. However, this can vary depending on factors like whether you still have the vehicle or returned it to the dealership.
What Should I Do Now? Do I Need a Claims Management Firm?
Here’s the straightforward answer: you do not have to use a law firm or claims management company to claim compensation.
The FCA’s proposed scheme is designed so that customers will be compensated without having to make complaints. However, the FCA also advises that if you’re unhappy about something a lender has done, you should complain.
Why Do Many People Still Use Claims Management Companies?
Even though it’s not compulsory, many customers choose to work with professional representatives. According to the FCA’s own Financial Lives 2024 survey:
- 32% of respondents strongly agreed with the statement: “I wouldn’t have been confident enough to make the claim without using a CMC”
- Another 32% slightly agreed with the same statement
This means nearly two-thirds of people surveyed felt they needed professional support to make their claim, even when they understood it wasn’t mandatory.
Making Your Decision
Some people prefer the reassurance and support of having a professional handle their claim. Others are comfortable managing the process themselves. There’s no right or wrong choice, it depends on your personal confidence level and circumstances.
If you choose to work with a claims management company, make sure they’re properly authorised by the FCA (you can check this on the FCA register). You can also read more about this in our article here: Choosing Allegiant Help You With Your Claims The Role Of A CMC
What Happens Next?
The FCA’s consultation on the motor finance redress scheme is ongoing. As more details emerge about timelines and processes, we’ll continue to provide updates.
Whether you decide to pursue a claim yourself or work with a professional representative, understanding your eligibility and rights is the first step toward potential compensation.
Need help understanding your car finance agreement? At Allegiant Finance, we’re here to help you navigate the complexities of car finance compensation claims. Our team can review your circumstances and explain your options in plain English.