Between 2007 and 2024, dealers arranging car finance in the UK had a lever most buyers never knew existed: they could nudge your interest rate up, and keep the difference as commission. The higher the rate they got you to sign, the more they earned. Nobody had to tell you.
The Financial Conduct Authority has now put a number on that quiet arrangement: 12.1 million car finance agreements potentially caught by its redress scheme, at an average payout of roughly £830 each. If you financed a car in that window, on PCP or hire purchase, this is not somebody else's scandal. Checking whether you are owed money costs nothing and takes one letter.
What Car Finance Mis-Selling Actually Was
The core of it was the discretionary commission arrangement, the DCA. The lender set a minimum interest rate, and the dealer or broker arranging your finance had discretion to charge you more than that. Their commission grew with the gap.
Think about what that means on the forecourt. The person "finding you the best deal" was being paid to do the opposite. And the disclosure rules at the time let them keep that incentive to themselves.
The FCA's scheme covers agreements from 6 April 2007 to 1 November 2024 where the customer was not properly told about the arrangement. It also catches deals where the commission was simply enormous, at least 39 per cent of the total cost of credit or 10 per cent of the loan, and deals where the dealer's exclusive tie to one lender was hidden.
Financial Conduct Authority, 30 March 2026
If you are unsure what kind of agreement you even had, our plain-English guides to PCP finance and hire purchase cover how each one works. Both types are in scope.
What the Redress Scheme Pays
The FCA's sums: an average of about £830 per mis-sold agreement, built from a refund of the commission plus a slice of the interest you paid, with annual interest added on top. If three quarters of eligible customers claim, the total bill lands around £7.5 billion.
Not every agreement qualifies. Tiny commissions are excluded, under £120 for older deals and £150 for deals from April 2014. So are a small band of very large loans and cases where no better deal existed for the customer anyway. But with 12.1 million agreements in scope, the odds that a household with a financed car in that period holds at least one eligible deal are not small.
The July 2026 Complication
The scheme launched on 30 March 2026 and promptly collected four legal challenges. Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole's motor finance arm argue it overreaches. A consumer group, Consumer Voice, argues the opposite, that the payouts are too low. As of early July 2026 the Upper Tribunal has suspended parts of the scheme while the challenges are heard.
The FCA has said it will defend the scheme "robustly". What that means for you is simple: the shape of the scheme may shift at the edges, but the sensible moves do not change. Find your paperwork, know your dates, and get your complaint on record with the lender.
How to Check and Claim, Without Losing a Third of It
The process was deliberately designed so you do not need anyone's help:
- Find the agreement. Any car finance taken between 6 April 2007 and 1 November 2024 counts, PCP or HP, new car or used. The lender's name is on the paperwork; if the paperwork is gone, your bank statements and credit report will name them.
- If you already complained, sit tight. Lenders are required to review earlier complaints under the scheme. You do not need to resubmit.
- If you have not complained, contact the lender directly. State that you believe your agreement involved an undisclosed discretionary commission arrangement and ask them to review it under the FCA scheme. Which? publishes a free template letter.
- Ignore the claims firms. The FCA's own warning is that using one can cost you over 30 per cent of any payout. It has already pulled 800 misleading adverts from these outfits. The scheme requires lenders to contact eligible customers, and the final claim deadline of 31 August 2027 leaves plenty of road.
- Keep an eye on the legal challenge. Deadlines within the scheme may move while the tribunal works through it. The 31 August 2027 backstop is the date to hold in your head.
One more angle worth knowing about if you are buying used rather than claiming: finance history stays attached to cars, not just people. A seller whose own finance was mis-sold may still owe money secured on the vehicle, and our guide to checking for outstanding finance explains why that matters before you hand over a penny.
The lenders ran this quietly for seventeen years. The regulator has now built the machinery to hand some of it back. Do not let inertia, or a claims firm's 30 per cent, keep your share.
Useful Links
- Options for dealing with your debts - GOV.UK - Official guidance if car finance repayments have become unmanageable
- Consumer protection rights - GOV.UK - Your statutory rights when a financial product was misrepresented
FAQ
How do I know if my car finance was mis-sold?
If you took out car finance between 6 April 2007 and 1 November 2024 and were not clearly told that the dealer could raise your interest rate to earn more commission, that the commission was unusually high, or that the dealer worked exclusively with one lender, you may be eligible. Dig out your agreement and complain directly to the lender.
How much compensation will I get for mis-sold car finance?
The FCA estimates an average of about £830 per agreement. The actual figure depends on the commission taken and the interest you paid: broadly a refund of the commission plus a portion of the interest, with interest added on top. Some agreements pay more, some less, and some are excluded.
Do I need a claims management company to claim?
No. The FCA is blunt about this: complain directly to your lender for free, because a claims firm can take over 30 per cent of your payout for filling in a form you can fill in yourself. The process is designed so lenders contact eligible customers directly.
Why is the car finance redress scheme suspended?
As of July 2026 the Upper Tribunal has suspended parts of the scheme while legal challenges are heard. Three lenders argue the scheme goes too far and a consumer group argues payouts are too low. The FCA says it will defend the scheme, but timings and some rules may shift.
Is there a deadline to claim for mis-sold car finance?
Yes. The scheme's backstop deadline for making a claim is 31 August 2027. If you complained previously you should not need to act, your lender is required to review your case. If you have not, watch for contact from your lender and do not sit on it.
