FCA Car Finance Compensation: Check If You’re Owed £829 Per Agreement

At the centre of this is a practice called a Discretionary Commission Arrangement (DCA). Here's how it worked in plain English.

When you walked into a dealership and arranged finance through them, the dealer (or broker) was being paid a commission by the lender. That's not unusual, but what was happening is this: in many cases, the dealer had the power to increase the interest rate on your loan to earn a bigger commission. Most importantly, they weren't informing you about it.

The FCA banned discretionary commission arrangements on 28 January 2021. However, the damage had already been inflicted on those who took out finance prior to that date. Investigations and court rulings revealed that millions of consumers paid more for their car finance than they should have, and the lenders and brokers had broken the rules and laws in force at the time.

No, and this is where it gets broader than many people realise.

The FCA's scheme covers three types of unfair commission arrangements:

• Discretionary Commission Arrangements (DCAs): The most common issue, covering approximately 10.6 million agreements. The dealer adjusted your interest rate to earn more commission, without telling you.
• High commission deals: Where the commission paid to the dealer was unusually high, specifically at least 39% of the total credit cost and at least 10% of the loan amount, and was not disclosed to you.
• Tied lender arrangements: Where the dealer claimed they were searching for the best deal, but had an exclusive or preferred arrangement with a particular lender, and didn't disclose it to you.

You only need to meet one of these three criteria to be eligible.

You may be eligible for compensation if all of the following apply:

• You financed a car, van, motorbike, or campervan (not a caravan) between 6 April 2007 and 1 November 2024
• The finance was a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement, or a personal loan arranged through a dealership or lease purchase
• The vehicle was purchased for personal use (not solely for business purposes)
• At least one of the three commission set‑ups we mentioned above applied to your agreement, and no one properly disclosed it to you.

It does not matter if:

• The finance agreement has already ended
• You have since sold or no longer own the vehicle
• The dealership has closed down or changed ownership; your complaint goes to the lender, not the dealer.
• You have multiple finance agreements; each one can be assessed separately

You will not be eligible if:

• The commission paid was low (£120 or less for agreements before 1 April 2014; £150 or less from that date)
• You were not charged interest on the agreement
• You have already received redress, had a court determination, or a successful Financial Ombudsman ruling on this specific agreement
• Your loan was of unusually high value, specifically, higher than 99.5% of all other loans in that year

The scheme runs in two main phases, depending on when you took out your finance:

• If your agreement was made between 1 April 2014 and 1 November 2024, lenders have until 30 June 2026 to prepare their systems. By 30 September 2026, they must inform you whether you are eligible for compensation and, if so, specify the amount. You then have until 31 October 2026 to accept or challenge their decision, with payments expected to be made from November 2026 onwards.
• If your agreement was between 6 April 2007 and 31 March 2014, lenders have a bit longer to complete the setup work, until 31 August 2026. They must then give you their decision by 30 November 2026. You will have until 31 December 2026 to accept or challenge it, and payments are expected to be made from January 2027 onwards.

Across both phases, the FCA expects most of the redress to be paid by the end of 2027, although complex cases and Ombudsman referrals might take longer.

If you have not yet complained and your lender determines that you might be owed money, they are required to contact you and invite you to opt in to the scheme, with a window of six months for you to decide.

The majority of claims are expected to be resolved by the end of 2027.

The process is straightforward and costs you nothing. Here is what to do:

Step 1: Check your credit report
If you can't remember who your lender was, your credit report (Experian, Equifax, or TransUnion) will show historic finance agreements and the lender's name. This is especially useful for older agreements.

Step 2: Gather your documents
Gather as much evidence as possible, including your original finance agreement, any correspondence from the lender or dealer, and payment records or bank statements. If you no longer have these documents, don't be discouraged. Lenders are required to keep their own records and must investigate your complaint regardless.

Step 3: Complain directly to your lender
Submit a written complaint to the finance company (not the dealership). Clearly state that you believe your agreement may have involved a commission arrangement that was not properly disclosed to you, and that you wish to be considered under the FCA's motor finance redress scheme.

Step 4: Wait for their assessment
Under the scheme, the lender has up to three months (after the implementation period ends) to assess your case and inform you whether you are owed money and how much.

Step 5: Accept, challenge, or escalate
You have one month to accept the offer or challenge it. If you disagree with the lender's decision, you can refer your case to the Financial Ombudsman Service (FOS) free of charge. The FOS will assess whether the lender properly adhered to the scheme requirements. You also have the option to pursue a court claim, although the FCA notes that, after legal fees, many consumers might end up with less than they would under the scheme.

No. The FCA, the Solicitors Regulation Authority (SRA), and the FCA's newly formed joint enforcement taskforce have been clear on this point.

• The scheme is free for consumers to use
• CMCs and law firms must legally inform you of the free scheme before signing you up
• If you sign up with a CMC, you could lose up to 30% of your compensation in fees
• Some CMCs have been found to use misleading marketing, inaccurate claim valuations, and sign people up without proper consent
• A joint taskforce comprising the FCA, SRA, Information Commissioner's Office (ICO), and Advertising Standards Authority (ASA) has been established specifically to crack down on poor practice by CMCs and law firms in this area.

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.