The financial regulator has provided an update for numerous motorists anticipating further information on a significant car finance compensation program. The Financial Conduct Authority (FCA) is presently seeking input on the specifics of a compensation initiative for individuals who were unfairly sold car finance agreements between 2007 and 2024 due to inadequate disclosure of broker commissions. Compensation may be warranted for individuals with car finance agreements involving discretionary commission arrangements (DCAs), where brokers and car dealers could boost interest rates on loans to earn more commission.
Additionally, car finance agreements eligible for compensation may include those with high commission structures or where brokers failed to disclose their exclusive partnership with a single lender. In a recent announcement, the FCA has mandated that motor finance companies must address complaints two months earlier than initially scheduled. The original deadline of July 31, 2026, has been advanced to May 31, 2026.
Handling of these complaints has been on hold since January 2024, meaning firms have not been required to respond yet, although they are expected to continue investigations. Firms are now obligated to issue final responses to any motor leasing complaints from December 5, 2025, in accordance with standard complaint resolution procedures.
Over 14 million car finance agreements could fall under the compensation program, anticipated to launch early next year. The FCA previously estimated an average compensation of around £700 for most drivers. The FCA emphasized the importance of prompt complaint resolution, as some consumers have been awaiting responses for nearly two years. The regulator hinted at the likelihood of proceeding with a scheme that includes specific rules and timelines for addressing complaints.
The FCA discouraged drivers from engaging lawyers or claims management firms for complaints, emphasizing the option to directly contact the lender for free complaint resolution. Individuals who have already lodged complaints before the scheme’s commencement are expected to receive compensation more swiftly. Lenders could potentially pay out £8.2 billion in compensation.
Consumer advocate Martin Lewis advised eligible individuals to submit complaints promptly for potential compensation. Lewis highlighted the benefits of initiating a complaint to preserve case details, especially in older cases where information may have been deleted by car finance firms. Lewis recommended submitting complaints now to ascertain eligibility for compensation without risking any losses by not doing so.
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