Car finance compensation scheme details to be released by FCA

The Financial Conduct Authority (FCA) is primed to announce the results of its consultation into a possible redress scheme for victims of the ongoing car finance scandal.

Back in August, the FCA said it would consult on an official redress scheme for those affected by Discretionary Commission Arrangements – an act which involved lenders inflating the interest of car loans in order to provide a bigger fee for the car dealership securing it. DCAs were classified as illegal in 2020, an estimated 14 million people signed up to one of these schemes and are thought to be eligible for compensation.

However, in a statement issued on Monday, the FCA said: “We will issue a statement to the market and publish our consultation on a proposed motor finance redress scheme, along with supporting evidence and analysis, shortly after markets close on Tuesday 7 October 2025.”

At this stage it’s unknown exactly when consumers will start receiving their payments, however, it’s likely to be sometime next year. Those hoping for thousands of pounds might be disappointed though, as payouts are expected to be in the hundreds.

What also remains to be seen is whether the FCA’s redress scheme will utilise an ‘opt-in’ or an ‘opt-out’ system; the former will require individuals to submit complaints to their lenders in order to receive compensation, while the latter will force lenders to contact those affected directly without the claimant having to lift a finger. At this stage an ‘opt-out’ scheme has been speculated to be the most likely scenario, as it places less strain on consumers.

Of course, the scope of the redress scheme is much narrower than it could have been; in May, the Supreme Court ruled that undisclosed commission was indeed legal as, in the particular case the judiciary was evaluating: “At no point did the dealer give any kind of express undertaking or assurance to the customer that in finding a suitable credit deal it was putting aside its own commercial interest as seller”.

That said, those with finance agreements deemed as unfair – such as one of the cases featured in the Supreme Court in which commission accounted for 55 per cent of what the customer had paid – could also be in-line for compensation. Whether they’ll be included within the redress scheme, or be a part of a separate one altogether is something still to be clarified.

Ultimately, we’ll just have to wait and see what happens. Stay tuned to Auto Express for the latest updates.

Buy a car with Auto Express. Our nationwide dealer network has some fantastic cars on offer right now with new, used and leasing deals to choose from...