Motorists mis-sold finance set for average £829 payout
Tue, 31 Mar 2026
Millions of motorists could be in line for an average windfall of £829 each as the City regulator finally firms up its multi-billion pound compensation scheme to tackle the car finance mis-selling scandal.
The car finance scandal first came to light in January 2024, exposing how dealers hid commission payments linked to the total cost of a loan.
Following an investigation, the regulator set a specific threshold for what counts as 'unfair' commission — a move that actually cleared many manufacturer-backed main dealer schemes of any wrongdoing.
The resulting claims and liability remain significant — more than 12 million finance agreements may have paid commission based on the interest rate the customer accepted, encouraging dealers to sell a higher rate than the customer could have qualified for.
Average settlement for these deals has been determined at £829 per agreement and finance firms are required to pay this without the need for claims to go through a legal firm or the courts.
When will the mis-sold finance redress scheme start paying claims?
The compensation rollout is split into two distinct groups based on when you signed your finance agreement:
- 1 April 2014 – 1 November 2024: These claims are being fast-tracked because the legal path is clear. You can expect the redress scheme to be live by June 2026.
- 1 April 2007 – 31 March 2014: While these older Discretionary Commission Arrangements (DCAs) were often more exploitative, they are harder to process. Finance firms claim much of the older customer data is missing, meaning this group has a later deadline of August 2026.
According to the FCA, the extra time customers have been out of pocket, and the generally larger disparity in base interest rate and the interest rate charged to customers via these commission-based arrangements means an average £31 increase in the redress due.
How can I claim for mis-sold car finance?
The whole point of this agreement is that you don't have to go through a legal firm, who will probably take a percentage of your compensation.
If you have already complained and the finance provider has confirmed that you were sold finance via a discretionary commission arrangement without disclosure of those terms, they should be in touch with you within three months after the deadlines above.
That means that barring any further legal challenges — which are unlikely for post April 2014 sales — you should receive compensation by September 2026 or November 2026 for earlier agreements.
If you already have a complaint in place and have up to date contact details, firms such as Close Brothers and Motonovo are likely to contact you ahead of the three-month deadline set by the FCA.
If you have not already complained and received acknowledgement that you were sold finance under the unfair terms determined by the FCA, a successful complaint should receive a response and settlement quickly once the scheme is operating. So you don't need to wait much longer.
Why were these finance packages considered unfair?
Paying commission for selling finance is a normal practice, and it hasn't always been necessary to disclose that the dealer is being paid for the finance being arranged by them.
What has been considered unfair is non-disclosure of the arrangement between the dealer and finance firm, and how that commission payment affects the customer.
The most common scenario is the dealer being able to choose which interest rate offered by the finance firm is offered to the customer when a higher rate would give the dealer a higher commission payment.
However, this is not the only unfair practice covered by the FCA redress scheme. Three unfair arrangements have been identified, any one of which qualifies for redress.
- A discretionary commission arrangement (DCA), which allowed the broker to adjust the interest rate the customer would pay to obtain a higher commission.
- A high commission arrangement (at least 39% of the total cost of credit and 10% of the loan).
- Contractual ties that gave a lender exclusivity or a right of first refusal, except where the lender can prove there were visible links with the manufacturer and dealer.
The third point is why main main-dealer finance packages were excluded from the redress scheme early on.
