Car Finance Claims: Who Is Owed Compensation and When

If you used finance to buy a car, motorbike or van between 6 April 2007 and 1 November 2024 you may be owed compensation. Many lenders did not properly tell customers important information about their agreements, which broke laws and FCA rules in force at the time. The FCA estimates that 37% of agreements made at the time are eligible for compensation, which is around 12.1 million agreements.

The scheme may apply to you if you used car finance for a motor vehicle, for example a car, motorbike, van or campervan, between 6 April 2007 and 1 November 2024, including hire purchase agreements such as Personal Contract Purchases, and you were not told about certain arrangements between the lender and the broker, whoever arranged your loan.

The arrangements include:

• ✓Yes: A discretionary commission arrangement (DCA), which allowed the broker to adjust the interest rate you paid to get a higher commission
• ✓Yes: A high commission arrangement, where the commission amount was at least 39% of the total cost of credit and 10% of the loan
• ✓Yes: A contractual tie, where your broker only used one lender or gave one lender the right of first refusal on your loan, which is not included if there were visible links between the lender, manufacturer and franchised dealer, for example where they shared a common or similar name

Your agreement will be considered fair if the commission was £120 or less for agreements beginning before 1 April 2014 and £150 or less from that date, or if you were not charged any interest. In a very small number of cases you may be out of time to get compensation, and if this applies to you your lender will explain why.

The scheme will not apply to you if:

• ✗No: You leased a car with Personal Contract Hire (PCH)
• ✗No: You have had your complaint considered by the Financial Ombudsman Service or determined by court
• ✗No: You have already accepted compensation
• ✗No: Your agreement was over £25,000 and entered into before 6 April 2008, or was for business purposes
• ✗No: You had a high value loan

The scheme covers agreements held by customers who have since passed away, so their beneficiaries may be able to claim, and the lender is likely to ask for a copy of the will or the grant of probate to make sure that any compensation is paid to the right person.

A high value loan is one that was higher than 99.5% of other loans that year, and loans above the threshold for each year are excluded from the scheme unless the loan was for a vehicle that was adapted for accessibility purposes. Before 6 April 2008 agreements greater than £25,000 were unregulated and so are not covered by the scheme.

If you had a high value loan and have not complained you will not be part of the compensation scheme and will not hear from your lender, but if you think you have been treated unfairly you can still complain in the normal way to the lender or the broker and, if you are unhappy with the response, take your complaint to the Financial Ombudsman Service.

When you use a car finance agreement the car dealer, or another credit intermediary, may have arranged it between you and a finance provider, and the finance provider may then pay commission to the car dealer or credit broker. A discretionary commission arrangement (DCA) is when the finance provider pays the car dealer commission, or a fee, based on the interest rate paid in the car finance agreement, the car dealer can set or adjust this interest rate, and the FCA banned DCAs in January 2021.

Apart from DCAs, car dealers and finance providers mainly use a fixed rate, where the finance provider pays a fixed amount of commission to the car dealer, usually a percentage of what is borrowed, or a flat fee, where the finance provider pays the car dealer a fee for every finance agreement they process or arrange.

After launching, the FCA's scheme was legally challenged and parts of it have been suspended, and the case is due to be heard in either December 2026 or February 2027. Until the legal process concludes, lenders do not need to calculate or pay compensation to people owed money under the scheme.

On 2 July 2026 the Upper Tribunal suspended parts of the scheme on terms agreed by the FCA with the four challengers, and firms must comply with all rules which are not suspended. The Upper Tribunal has confirmed it will hear the legal challenges on 14 to 18 December 2026 or 16 to 26 February 2027, and the final dates depend on whether any of those involved apply for further expert opinion or disclosure of information, and whether any such application is successful.

If you have already brought your complaint to the Financial Ombudsman Service you do not need to do anything, and it will investigate your complaint and give you an answer in due course.

If you have concerns the best thing you can do is complain to your lender, which is free. You can search the FCA list of lenders to find relevant contact details, a template complaint letter or email, or a link to the lender's dedicated complaint form.

Because some parts of the scheme have not been suspended some customers will be told by their lender that they are not owed any compensation, and if your agreement began on or after 1 April 2014 and you complained by 30 June 2026 your lender should contact you by 18 November 2026, and if your agreement began before 1 April 2014 and you complained by 31 August 2026 your lender should contact you by 18 January 2027.

If you complain after these dates and you are not owed compensation your lender should tell you within 5 months of receiving your complaint. If you do not hear from your lender by those dates it does not necessarily mean that you are owed compensation.

The dates do not apply if your lender considers your complaint is out of time, or if your complaint is about a contractual tie and the lender says you are not owed compensation because there were visible links between the lender, manufacturer and franchised dealer, for example because they shared a common or similar name. Consumers who are not contacted can still complain to their firm by 31 August 2027.

If your lender tells you that you are not owed compensation under the scheme rules or that your case falls outside the scheme and you believe it has made a mistake you should ask your lender to review its decision, and if you are still unhappy you can refer the complaint to the Financial Ombudsman Service and you can also consider whether to pursue a claim through the courts.

If your lender sends you a redress determination and you remain unhappy you can complain to the Financial Ombudsman Service, which is a free service, and it is important to contact it by the date given in your lender's redress determination letter or it may not be able to help.

People who get compensation will receive an average of around £830 per agreement, but this will vary, with some people getting more and some getting less. This type of borrowing is not covered by the Financial Services Compensation Scheme, so if your lender goes out of business you may not get any compensation.

In 1 in 3 cases your final amount will be capped, because after working out your compensation it will be checked against 3 limits, which are 90% of the commission paid plus interest, the total cost of credit adjusted to account for a minimal cost, and the actual total cost of credit calculated on a simpler basis, and if your compensation is higher than any of these limits it will be reduced to the lowest one.

If the interest rate you paid was in the lowest 5% offered at the time, excluding 0% APR deals, you will not receive compensation, because your interest rate was already among the cheapest available. If you are, or have been, bankrupt or are in an individual voluntary arrangement (IVA) or other formal insolvency proceedings you should tell your lender, and you should also tell your official receiver (for bankruptcy) or insolvency practitioner (for other insolvency proceedings).

You do not need to use a claims management company (CMC) or a law firm to take part in the scheme, you can complain now for free without using one, and you do not need to use a CMC to find out if you are eligible. If you sign up to a CMC or law firm you may end up paying for a service you do not need, including up to 36% in fees, including VAT, out of any compensation you receive.

If you sign up with more than one firm you may have to pay fees to end the agreement or have multiple representatives claiming success fees, which could also delay you getting the money you are owed.

If you decide you no longer want to use a CMC or law firm you can end your agreement but you may be charged a fee, which should be reasonable and should reflect the work the CMC or law firm has already done. If you think you have been signed up without your consent, misled or treated unfairly you can ask to exit your contract for free.

If you are unhappy with how a CMC or law firm has handled your case you can complain to it, and if you are unhappy with the response or it does not reply within 8 weeks you can take your complaint to the Legal Ombudsman if it is about a law firm or the Claims Management Ombudsman if it is about a CMC.

You can also bring a claim about your car finance commission to court, and if you are considering this option you should think about getting independent legal advice, and taking part in the scheme is likely to be simpler and more certain than taking your claim to court because after legal fees are deducted you could end up with less.

If your car finance claim has already been decided by a court you will not be able to have it considered again under the scheme, and if you have started legal action but not yet been to court your lender will be able to pause considering your case under the scheme until it hears what you would like to do. Our small claims guide explains how a court claim works.

Scammers have contacted people pretending to be from car finance lenders offering fake compensation, you can search the FCA list of car finance lenders to check you are dealing with a genuine firm, and the FCA would never ask you to transfer money to it and would never ask for your bank account PINs and passwords. See our guide to refunds after a bank transfer scam.