FCA proposes £9.1bn redress scheme for mis-sold motor finance

# FCA proposes £9.1bn redress scheme for mis-sold motor finance

Event date: 2026-03-30

Millions of UK drivers could receive compensation after the Financial Conduct Authority set out a redress plan for mis-sold motor finance agreements, with average payouts estimated at about £829.

BBC News reported that the City regulator now believes 12.1 million motor finance deals will meet its new criteria, down from an earlier estimate of 14.2 million. The FCA said the total cost of the scheme is expected to reach £9.1bn, made up of about £7.5bn in customer payments and £1.6bn in administration costs.

The proposal follows a long-running dispute over lending practices in the car finance market. The issue centres on discretionary commission arrangements, where dealers could be paid more by lenders when customers were charged higher interest rates. The FCA banned those deals in 2021 and now says it wants to “draw a line under the past” while protecting a healthier market going forward.

The regulator’s scheme is designed to let consumers claim without having to pay a lawyer or take firms to court. It also covers some other arrangements between lenders and dealers, including certain high commission structures and some exclusive or first-refusal agreements that may not have been disclosed clearly to borrowers.

The timeline is important. The FCA has split the redress process into two parts to reduce the risk that legal challenge over older agreements delays compensation for more recent ones. One part covers loans made between 6 April 2007 and 31 March 2014; the other covers agreements from 1 April 2014 to 1 November 2024.

For the most recent period, lenders have until the end of June this year to handle cases. For older agreements, the deadline is the end of August. Customers who have already complained, or who complain before the cut-off dates, should hear from their lender within three months. Those unhappy with their offer can take the matter to the Financial Ombudsman Service.

The FCA also said people who are not contacted directly may still be able to complain until the end of August 2027. That means the scheme is likely to unfold over months rather than days, even though the regulator has set out a central framework.

Industry groups and consumer advocates responded cautiously. The Finance and Leasing Association said redress should be targeted only at customers who genuinely suffered loss, while Consumer Voice argued the proposal did not go far enough. The FCA, for its part, said it expected firms to put things right promptly.