The Financial Conduct Authority (FCA) has announced plans to introduce a redress scheme for consumers affected by the car finance scandal. The scheme aims to provide compensation to millions of drivers who were mis-sold car finance.
The FCA estimates that the scheme could cost between £9 billion and £18 billion, with motorists likely to receive less than £950 in compensation per claim. The regulator will start consulting on the scheme next year, with plans to include motorists who were harmed by discretionary commission arrangements.
Discretionary commissions, which were banned in 2021, inflated the cost of car financing by allowing car dealers to claim higher commissions if they put customers on loans that earned higher interest rates for the lender. The FCA will also consult on broader motor financing issues where motorists may have been harmed by egregious or unfair commission arrangements.
The scheme aims to balance concerns around the level of harm caused to consumers with the need to ensure lenders do not react by pulling affordable loans from the market. The FCA has promised a fair and easy-to-participate-in scheme, with no need to use claims management companies or law firms.
Industry experts have expressed concern that the industry could resist the redress plans, but regulators say they will ensure lenders assess claims consistently, efficiently, and fairly. Motorists who have already filed a complaint with their lender do not have to do anything, as complaints are being put on pause until at least December.
Source: https://www.theguardian.com/business/2025/aug/03/city-regulator-unveils-car-loan-compensation-scheme-worth-up-to-18bn