Millions of UK drivers are set to receive long-awaited compensation payouts this year following a major update from the Financial Conduct Authority (FCA) regarding the mis-sold car finance scandal.

The City watchdog has confirmed it is pushing ahead with plans for a comprehensive industry-wide redress scheme, with final rules expected to be published at the end of March. If approved, the scheme could see affected consumers receive compensation for hidden commission arrangements on car loans taken out over the last 17 years.

Here is the latest information on the FCA redress scheme, including who is eligible, how much you could get, and when you can expect to be paid.

When will the FCA car finance compensation be paid?

According to the FCA, the streamlined process is designed to ensure that millions of people receive their compensation during 2026.

Following the consultation closing, the regulator will publish its final rules in late March. To allow lenders time to prepare for the massive undertaking, the FCA has indicated it will introduce an implementation period. Lenders are likely to be given between three and five months to set up their systems for processing claims.

Once this implementation period ends, firms will have a further three months to contact affected customers to tell them if they are owed money and how much. Consumers who receive an offer will be able to accept it immediately, speeding up the payment process.

What is the motor finance compensation scandal about?

The compensation stems from the FCA’s review into historical motor finance agreements. The regulator found that many lenders and car dealers (brokers) broke consumer laws by failing to disclose details about commission payments.

Specifically, the investigation focused on Discretionary Commission Arrangements (DCAs) , which were banned by the FCA in 2021. Under these arrangements, brokers were allowed to increase the interest rate on a customer’s car loan to earn a higher commission, often without the customer’s knowledge or consent.

In August 2025, the Supreme Court ruled that in certain circumstances, failing to properly disclose these commission arrangements could be deemed unfair and unlawful, paving the way for the current compensation scheme.

Am I eligible for the FCA redress scheme?

The FCA’s proposed scheme will cover motor finance agreements taken out between 6 April 2007 and 1 November 2024.

You may be owed compensation if you were not told about specific features of the deal between the lender and the broker (car dealer). You are likely eligible if your agreement involved:

• A discretionary commission arrangement: Where the broker could adjust the interest rate to get a higher commission.

• A high commission arrangement: Specifically where the commission was 35% of the total cost of credit or 10% of the loan.

• An exclusive tie: A contractual arrangement that gave a specific lender exclusive or near-exclusive rights to provide credit through that broker.

The FCA estimates that millions of consumers could be in line for an average payout of around £700 per car loan, leading to a total industry compensation bill of approximately £8.2 billion.

How to claim: Do I need to use a claims management company?

The FCA has issued a strong warning to drivers about using third-party claims management companies (CMCs).

Do not use a claims management company or a law firm to make your complaint. The process is designed to be free and simple. Using a CMC could result in you losing a significant chunk of your compensation in fees.

What you should do now:
If you think you were mis-sold car finance, the FCA advises that you complain directly to your lender immediately.

• You can submit your own complaint using a free template letter available on the FCA website.

• Those who complain before the scheme officially starts are likely to receive their compensation faster.

• If you have already complained, the lender will contact you once the scheme is live to confirm your payout.

What happens next?

The FCA is currently reviewing over 1,000 responses to its consultation. The final rules, due in late March, will provide the definitive framework for the payouts.

If the scheme goes ahead as planned, lenders will begin contacting customers later in 2026. For those whose lenders cannot trace them, a separate claims process will be available for up to a year after the scheme starts.