FCA Car Finance Redress Scheme Confirmed: Final Rules, Eligibility, and What to Do Now

The FCA published its final rules for the motor finance redress scheme on 30 March 2026.¹ The scheme is confirmed, it is compulsory for lenders, and it covers agreements going back to 2007. If you had a car on finance at any point between then and November 2024, there is a reasonable chance you are owed money.²

We have been working on car finance commission claims since this area first gained traction and have followed the legal and regulatory process closely. This article covers what the final scheme actually says, who qualifies, how compensation is calculated, and what to do now.

What is the FCA motor finance redress scheme?

The FCA has used its powers under section 404 of the Financial Services and Markets Act 2000 to establish a compulsory, industry-wide compensation scheme for motor finance customers who were treated unfairly.¹ The scheme follows the Supreme Court’s judgment on 1 August 2025 in Johnson v FirstRand Bank Ltd and related appeals, which established that undisclosed commission arrangements in motor finance could amount to an unfair relationship under section 140A of the Consumer Credit Act 1974.³

The FCA’s own review of over 4,000 case files found widespread failures to disclose commission arrangements. The regulator has been unambiguous: firms “broke laws and rules in force at the time.”¹

The scheme is free to use. The FCA received over 1,000 responses to its consultation and has changed the final design in several ways – tightening eligibility, adjusting the compensation calculation, and shortening the process so people are paid sooner.²

Two schemes, one framework

One important change from the consultation is that the FCA is implementing two separate schemes:¹

Scheme 1 covers motor finance agreements taken out between 6 April 2007 and 31 March 2014.

Scheme 2 covers agreements taken out between 1 April 2014 and 1 November 2024.

The FCA is clear that it has the legal power to cover both periods, but some consultation respondents questioned the pre-2014 element. By splitting the scheme, the FCA ensures that if the earlier period is subject to legal challenge, redress for post-2014 consumers will not be delayed. In practice, the two schemes operate under the same framework and the same rules – the split is a legal safeguard, not a substantive difference in how your claim is handled.

Who is eligible for car finance compensation?

The scheme covers regulated motor finance agreements – including PCP, hire purchase, and conditional sale agreements – where a commission was paid by the lender to the broker (typically the car dealer).¹

Under the final rules, a relationship will be presumed unfair where the lender failed to adequately disclose one or more of the following:

Discretionary Commission Arrangements (DCAs) – where the broker could adjust the interest rate charged to the consumer in order to increase their own commission. These were banned in January 2021.

High commission arrangements – now defined as commission of at least 39% of the total cost of credit and 10% of the loan. This threshold has been raised from the 35%/10% proposed at consultation, reflecting the FCA’s analysis of what lies significantly beyond market norms.¹

Contractual ties – where the lender had exclusivity or a right of first refusal over the broker’s business. However, the FCA has introduced a new exception: where visible branding links between the lender, manufacturer, and franchised dealer made the relationship apparent, the failure to disclose the tie will not be treated as unfair.¹

The FCA has also introduced several other exceptions. Cases will be considered fair where the commission was £120 or less (pre-2014) or £150 or less (post-2014), where no interest was charged, where a DCA existed but was not used to increase commission, or where the lender can demonstrate no better deal was available.¹

The FCA now estimates 12.1 million agreements are eligible, down from 14.2 million at consultation.²

How much compensation could you receive?

The FCA estimates an average payout of around £830 per agreement, up from the £695 estimated at consultation. Total redress is projected at £7.5 billion (assuming 75% take-up), with total costs to the industry of £9.1 billion including implementation – almost 20% lower than estimated in the consultation.²

How your compensation is calculated depends on the specifics of your agreement:

The Johnson remedy applies to cases with very high commission (at least 50% of the total cost of credit and 22.5% of the loan) combined with a DCA and/or tied arrangement. These consumers receive full repayment of the commission plus interest, with no caps. This mirrors the remedy the Supreme Court awarded in the Johnson case itself.¹

For all other eligible cases, the FCA applies a hybrid remedy: the average of estimated loss and the commission paid, plus interest. The estimated loss is calculated by reference to an APR adjustment – 17% for agreements from 1 April 2014 onwards, and 21% for earlier agreements (reflecting the FCA’s finding that more harmful DCA practices were more prevalent in earlier years).¹

In around one in three hybrid-remedy cases, compensation will be capped at the lowest of 90% of the commission plus interest, the adjusted cost of credit (excluding the cheapest 5% of deals), or the actual cost of credit. These caps ensure consumers are not put in a better position than if they had been treated fairly.¹

Interest is added at the annual average Bank of England base rate plus 1%, with a new minimum floor of 3% in any year. This better reflects the borrowing costs consumers actually faced, even during the low-rate environment that existed for much of the scheme period.¹

Do you need to make a claim, or is it automatic?

It depends on whether you have already complained to your lender. The final scheme sets out two separate tracks with different timelines:¹²

When will car finance compensation be paid?

The scheme has two implementation periods during which firms must prepare:¹

For Scheme 2 (agreements from 1 April 2014): implementation ends 30 June 2026. Complainants should be told by 30 September 2026 whether they are owed money. If they accept, payment follows within a month – meaning compensation could be in your account by November 2026.

For Scheme 1 (agreements from 6 April 2007 to 31 March 2014): implementation ends 31 August 2026. Complainants should be told by 30 November 2026, with payment by January 2027.

For consumers who have not yet complained and are contacted by their lender, the timeline extends further – with opt-in invitations sent by end of 2026 (Scheme 2) or February 2027 (Scheme 1), and claims settling through 2027.

The FCA’s stated objective is for millions of claims to be settled in 2026, with the vast majority resolved by the end of 2027.²

Why this matters: the car finance scandal in context

It would be easy to view this as a narrow dispute about commission disclosure. But the reality, as recent academic research has emphasised, is that the car finance scandal sits within a much longer pattern of financial mis-selling in the UK – one that stretches back through PPI, endowment mortgages, and pensions.⁴

In a detailed analysis published by Cambridge University Press in 2026, Dr Asta Zokaityte of the University of Kent traced the structural similarities across these episodes. In each case, financial products were distributed through intermediaries who were paid by commission. In each case, those commissions created incentives that were misaligned with consumers’ interests. And in each case, the regulatory response focused primarily on improving disclosure and providing redress after the damage was done – without fundamentally addressing the business model that produced the harm in the first place.⁴

The car finance market follows this pattern closely. PCP agreements – the dominant form of motor finance in the UK – are structured around low monthly payments that defer a large “balloon” payment to the end of the contract. Industry data shows that over 75% of PCP customers do not pay the balloon and instead roll into a new agreement, effectively renting rather than owning their vehicle.⁵ Research has found that nearly a quarter of consumers could not correctly answer basic questions about how their PCP contract works, even among university graduates.⁶

This matters because, for many people, a car is not a luxury – it is essential for getting to work, accessing healthcare, and managing daily life, particularly outside major cities. By 2018, over 90% of private new car purchases were financed.⁷ The FCA’s own Financial Lives survey found that 28% of UK adults were struggling financially as recently as early 2024,⁸ and StepChange, the UK’s leading debt charity, reported a 15% rise in clients with car finance debt between 2020 and 2023.⁹

Motor finance debt in the UK grew from £11.2 billion in 2009 to £40.7 billion in 2022 – a 263% increase – while average earnings rose by just 41% over the same period.¹⁰ When credit grows that much faster than incomes, and when the products involved are complex and built around commission, the scale of what happened was not an accident.

How can Allegiant help?

We want to be upfront about this: the FCA has made clear that you can complain to your lender directly and that you do not need to use a claims management company. We agree. Many straightforward cases can and should be handled that way.

But not every case is straightforward. Some consumers had multiple finance agreements with different lenders. Some are unsure which lender they dealt with, or whether their agreement involved a DCA, a tied arrangement, or both. Some have had complaints rejected in the past and want to understand how the new scheme changes things. And some simply find the process stressful or confusing and want someone to manage it on their behalf.

That is where we come in. Allegiant is authorised and regulated by the FCA. We have been working on car finance commission claims since this area first emerged and know how to assess eligibility, manage complaints, and push back when lenders get it wrong.

If you think you may be affected by the FCA’s motor finance redress scheme, you can check your eligibility with us at no upfront cost. We will review the details of your finance agreement and let you know whether we think you have a claim worth pursuing.