Car finance compensation: where it stands and how to claim for free

What is being shared

“Car finance compensation update due as court hearing starts this week” ran on Brit Brief on the morning of 5 October 2026, quoting Harry Charalambous of the advisory firm Broadstone. The trade press covered the same hearing from the lenders’ side: AM-online reported that motor finance provisions had surged as the redress hearing began, and Credit Connect that the sector was being urged to keep up its redress preparations.

The hearing the headlines mean is the second case management hearing in the legal challenge to the FCA’s scheme, fixed by the Upper Tribunal for 5 and 6 October 2026. Its job is to decide the parties’ applications to bring expert evidence and for disclosure of documents, and other case management issues; the Tribunal said the date of the main hearing would be confirmed after it. It is not the hearing that decides whether the scheme is lawful. Any update from it is about dates and procedure, not payouts.

Who the scheme covers

The Motor Finance Consumer Redress Scheme was made by the FCA’s policy statement PS26/3 on 30 March 2026. It is really two schemes: one for agreements taken out between 6 April 2007 and 31 March 2014, and one for agreements from 1 April 2014 to 1 November 2024. It covers finance for a car, van, motorbike or campervan, including hire purchase and personal contract purchase (PCP), where the lender paid commission to the broker (usually the dealer) and the customer was not told about at least one of three arrangements between them.

The three are: a discretionary commission arrangement (DCA), which let the broker adjust the interest rate to earn more commission; high commission, meaning at least 39% of the total cost of credit and at least 10% of the amount borrowed; or a contractual tie, where the broker used only one lender or gave one lender first refusal, unless there were visible links between lender, manufacturer and franchised dealer, such as a shared name.

An agreement counts as fair, and gets nothing, if the commission was £120 or less (before 1 April 2014) or £150 or less (from that date), or if no interest was charged.

Not covered: personal contract hire (PCH) leases; complaints already decided by the Financial Ombudsman or a court; anyone who has already accepted compensation; agreements over £25,000 that were made before 6 April 2008 or were for business purposes; and the highest-value loans for their year, above the 99.5th percentile, which the FCA puts at £38,000 in 2008 rising to £82,000 in 2023 and 2024, unless the vehicle was adapted for accessibility.

People with a high-value loan can still complain to the lender in the usual way, then to the Financial Ombudsman. Lenders may also leave out high-commission-only agreements that ended before 26 March 2020 if they can show it was clearly and prominently disclosed that commission was payable; they must tell you and explain why, and you can challenge that with the Ombudsman.

The FCA’s estimates, all made before the suspension: about 12.1 million agreements are eligible, 37% of those made in the period, so most are not. The FCA says people who get compensation will receive an average of “around £830” per agreement (£829 in its own table), some more and some less. Firms would pay about £7.5bn in redress if 75% of eligible consumers take part, or £9.1bn including £1.6bn of costs that are not redress. These are estimates, not entitlements, and an average is not what any one person gets.

How a payout is worked out, under rules that are currently suspended. About 90,000 consumers whose cases are like Mr Johnson’s (an undisclosed tie or DCA, with commission of at least 50% of the total cost of credit and 22.5% of the loan) get all the commission back plus interest. Most others get the average of the commission and an estimated loss, plus interest; the loss is an APR adjustment of 17% for agreements from 1 April 2014 and 21% before then, and in about 1 in 3 of these cases the amount is then capped.

About 64,000 agreements whose APR was among the cheapest 5% offered at the time (excluding 0% deals) get nothing. Interest is simple: the annual average Bank of England base rate plus 1%, with a 3% floor in any year.

Behind all this is the Supreme Court’s judgment of 1 August 2025 in Hopcraft, Johnson and Wrench. The claims in tort and equity failed; Mr Johnson won under section 140A of the Consumer Credit Act 1974, on an unfair relationship. His commission was 25% of the credit advanced and 55% of the total charge for credit, and the court ordered it paid to him with interest. The court said non-disclosure alone will not necessarily make a relationship unfair; it is one factor to weigh.

Where it stands now

Last checked: the morning of 6 October 2026. The scheme is suspended in part. The Upper Tribunal’s direction, released on 1 July 2026 and treated as taking effect from a case management hearing on 29 June, keeps only the rules listed in its Appendix 1 in force; the rest of the scheme rules (CONRED 5 and 6) are suspended until the Tribunal orders otherwise or finally decides the applications. The FCA announced this on 2 July, on terms it had agreed with the four challengers.

The FCA describes the four as commercial parties: three lenders, CA Auto Finance UK, Mercedes-Benz Financial Services UK and Volkswagen Financial Services (UK), and Consumer Voice, which the FCA says is represented by Courmacs Legal. Each has applied to the Upper Tribunal (Tax and Chancery Chamber) for a review of the scheme under section 404D of the Financial Services and Markets Act 2000.

The FCA’s May summary of the grounds says that, between them, the challenges argue the scheme is both too favourable to consumers and too favourable to lenders. For the three lenders, permission to bring the challenge and the challenge itself will be heard together at one rolled-up hearing; Consumer Voice’s permission is to be decided at a case management hearing or at the main hearing.

The Tribunal said in July that it would list the main hearing either for five days from 14 December 2026 or nine days from 16 February 2027, depending on the outcome of the expert-evidence and disclosure applications, and that the date would be confirmed after the second case management hearing. That hearing was fixed for 5 and 6 October. When we checked on the morning of 6 October, neither the FCA’s legal-challenge page (last updated 1 September) nor its consumer page carried an outcome or a confirmed date.

Until the legal process ends, the FCA says lenders “do not need to calculate or pay compensation to people owed money under the scheme”. They must still identify complaints and agreements, gather their commission and disclosure records, and tell people who complained but are not owed anything. The temporary pause on handling these complaints, in place since 11 January 2024, expired on 31 May 2026; complaints wholly outside the scheme should be progressed in the usual way. The FCA expects the three challenging lenders, at a minimum, to contact all their complainants directly to explain the challenge.

If the scheme is upheld and the judgment is not appealed, the FCA expects payments under it to begin in 2027. It says judgment is expected in the months after the hearing and gives no date. The law firm CMS suggests a decision six to eight weeks after the hearing ends; by our arithmetic that is late January to mid-February 2027 after a December hearing, or April 2027 after a February one. That is a law firm’s estimate, not an official date.

MoneySavingExpert reported on 2 July that Martin Lewis expects payouts no earlier than mid-2027, with appeals possible.

If the scheme is overturned in whole or in part, the FCA says it will need to decide what to do next, and names two possibilities. One is a revised scheme, which could itself face a further legal challenge and delay compensation to 2028 or beyond. The other is telling lenders to handle complaints one by one: the lender would reply within eight weeks, and you could then go to the Financial Ombudsman.

In May the FCA told lenders to be ready, on a precautionary basis, to handle complaints within the usual statutory timeframes from mid-November 2026, in case there is no scheme. That is an instruction to lenders about readiness, not a date on which anything happens for you.

The dates that still matter

18 November 2026. If your agreement began on or after 1 April 2014 and you complained by 30 June 2026, your lender should tell you by this date if you are not owed compensation under the scheme.

18 January 2027. The same, for agreements that began before 1 April 2014 where you complained by 31 August 2026. If you complain after these dates and are not owed anything, your lender should tell you within five months.

When the scheme was suspended, the FCA said it would not take action against a lender that tells people within seven weeks of the original deadlines of 30 September and 30 November 2026; 18 November and 18 January are those deadlines plus seven weeks, so do not add anything to them. The dates do not apply where the lender thinks your complaint is out of time, or in contractual-tie cases where it relies on visible links between itself, the manufacturer and the dealer. The FCA says lenders should write by these dates, not must.

Not hearing by these dates does not necessarily mean you are owed money. If you are told you are not owed anything and think that is wrong, go back to the lender and ask for a ‘redress determination’, then go to the Financial Ombudsman, or consider the courts.

31 August 2027. The FCA’s March rules set this as the last date for people whose lender never contacts them to complain to the firm. It is in PS26/3 and in the FCA’s 30 March statement, but not on its current consumer page or in the July suspension statement, and we have not been able to establish whether the rule behind it is among those suspended. Treat it as set in March and liable to change.

14–18 December 2026 or 16–26 February 2027. The main hearing, one or the other, to be confirmed by the Tribunal. 2027. The FCA’s earliest expectation for scheme payments, and only if the scheme is upheld and the judgment is not appealed.

Dates you will still see repeated that are no longer live: the original PS26/3 timetable had decisions for existing complainants by 30 September and 30 November 2026, payments from about November 2026 and January 2027, letters to people who had not complained but might be owed money by 31 December 2026 and 28 February 2027, and payments to those people by about November 2027 and January 2028.

The FCA’s 30 March statement still says millions of consumers will be compensated this year. All of that was written before the suspension; none of it is current.

How to complain for free, step by step

Step 1: work out who your lender was. It is the finance company behind the agreement, not the dealer. If you have lost the paperwork, the FCA suggests checking old bank statements, asking the dealer, or looking at your credit file; it names Equifax’s Car Finance Checker app, the free credit files from Experian and TransUnion, and the ICO’s guidance on getting your credit file free. You do not need to pay anyone for this step.

Step 2: complain to the lender, free. The FCA says the best thing you can do if you have concerns is to complain to your lender, and that you can do it for free. Its list of lenders gives each firm’s contact details and either a link to the lender’s own complaint form or, where there isn’t one, the FCA’s template complaint letter or email to fill in.

The list was first published on 29 March 2026; when we checked on 6 October it had last been updated on 16 September. If you know your lender’s name but are not sure a phone number is genuine, the FCA will put you through to the lender on 0300 124 8899.

Step 3: wait for the lender’s answer. While the scheme is suspended the lender does not have to work out or pay compensation, so for most people the next thing that happens is either a letter saying they are not owed anything, by the dates above, or nothing until the court case ends. When the scheme is running, you have one month after the lender’s response to accept or challenge it, and once you accept, the lender has one month to pay.

Step 4: the Financial Ombudsman, free. If you are unhappy with or want to query the lender’s response, the Ombudsman says to go back to the lender and ask for a ‘redress determination’. If you are still unhappy, take it to the Financial Ombudsman Service by the date in the lender’s letter.

Under the scheme the Ombudsman checks whether the lender followed the rules; it cannot look at a case until there is a redress determination or the deadline for one has passed. Complaints that reached it before 30 March 2026 carry on as before. Its car finance page had not been updated for the July suspension when we read it on 6 October, so go by the FCA’s dates.

Complaints outside the scheme follow the Ombudsman’s ordinary time limits, and so would complaints handled one by one if the scheme is overturned and the FCA takes that route. Complain to the firm within six years of the problem or three years of becoming aware of it; the firm usually has eight weeks to reply; you then have six months from its final response to go to the Ombudsman.

The Ombudsman can still help after six months in exceptional circumstances, where there was no valid final response, or if the firm agrees.

Three situations the FCA covers specifically. If the customer has died, their beneficiaries may be able to claim: complain to the lender using your own details, making clear you are claiming on behalf of the person who died, and expect the lender to ask for a copy of the will or the grant of probate.

If you are, or have been, bankrupt or are in an IVA, tell both the lender and your official receiver or insolvency practitioner. And this borrowing is not covered by the Financial Services Compensation Scheme, so if a lender goes out of business you may not get compensation. Going to court instead is possible, but the FCA notes you could end up with less after legal fees.

Claims firms: what they charge and how to cancel one

You do not need a claims management company or a law firm to complain. The FCA’s consumer page says that if you sign up to one you may pay for a service you don’t need, including up to 36% of any compensation in fees, including VAT. The 36% is the FCA’s 30% fee cap on the smallest awards plus VAT at 20%. On an award of £830, the FCA’s average, a 36% fee would be about £299: our arithmetic, for illustration only.

The FCA’s fee cap for authorised claims firms applies to financial-services claims started on or after 1 March 2022, as a share of what you are awarded: 30% on awards of £1 to £1,499 (at most £420, or £504 with VAT); 28% on £1,500 to £9,999 (at most £2,500, or £3,000); 25% on £10,000 to £24,999 (at most £5,000, or £6,000); 20% on £25,000 to £49,999 (at most £7,500, or £9,000); and 15% on £50,000 and over (at most £10,000, or £12,000).

The cap does not apply if you choose to pursue a claim in court with a claims firm.

Claims firms authorised by the FCA must give you a one-page summary of key information before you sign and a 14-day cooling-off period in which you can cancel without charge, and must not email or text you unless you agreed to it. You can cancel after the 14 days, but may be charged a fee, which must be reasonable and reflect work actually done; the FCA suggests checking any itemised bill against what you were told you would be charged. Firms should check you are not already represented by another firm.

To complain about a claims firm, go to the firm first; if you are unhappy with its answer, or it has not replied within eight weeks, go to the Claims Management Ombudsman, part of the Financial Ombudsman Service, or for a law firm the Legal Ombudsman. If you were signed up without your consent, misled or treated unfairly, the FCA says you can ask to leave the contract for free.

On 8 June 2026 the FCA added a template letter for complaining about a claims firm or law firm to its car finance page. Its guide to using claims management companies sets out the rules above.

The regulator has been clear about this. On 23 April 2026 it said consumers do not need to use a CMC or a law firm, and asked law firms and claims firms involved in challenging the scheme to consider their clients’ position. From 27 July to 6 September it ran a £2m campaign, “You don’t need to pay to claim”, on television, radio, print, billboards and social media.

Its survey of 1,000 motor finance customers (Kantar, 25 to 28 June) found 27% lacked the confidence to complain without a firm, 59% had claimed or were considering it, 23% were unsure of their options, and 80% said the template letter would make them more confident.

In June 2026 the FCA, working in a joint taskforce with the Advertising Standards Authority, the Solicitors Regulation Authority and the ICO, had 170 misleading car finance claims adverts removed or amended, taking the total to 1,200 since January 2024; it says more than 28,000 people have been able to leave claims contracts free of charge.

On 8 June the FCA warned about “money tips” videos on social media that are paid claims-firm or law-firm promotions dressed up as independent advice, and said it had banned adverts from a claims firm that used edited, unauthorised clips of Martin Lewis. Our guide to deepfake scam adverts covers how to check adverts like these.

Scam warnings

Two kinds of unwanted contact are circulating, and they are different. The first is marketing by claims firms and lead generators: nuisance texts and calls, which are a regulatory matter rather than fraud. The second is fraud: people pretending to be your lender, or the FCA, to get money or bank details out of you.

On fraud, the FCA says it has had reports of scammers posing as car finance lenders and offering fake compensation; check any contact against the FCA’s lender list before you reply. Others pose as the FCA itself. The FCA says it would never ask you to transfer money to it or for your bank PINs or passwords. Its genuine emails come from addresses ending @fca.org.uk, though fraudsters use look-alike addresses. To check, call its helpline on 0800 111 6768 yourself: the FCA warns that scammers can make that number appear on caller ID.

One nuance matters. A genuine lender may ask for your account number and sort code in order to pay compensation, so that question alone does not prove a scam. Share those details only when you are certain who you are dealing with, and never share a PIN or password with anyone.

Genuine letters telling people who complained that they are not owed compensation under the scheme are due by 18 November 2026 and 18 January 2027. Whatever arrives, check the sender’s details against the FCA’s lender list rather than any number in the message. If you have handed over money or details, our guide to what to do if you’ve been scammed gives the order to act in: your bank first, then report it. Convincing phone calls are covered in our AI voice-cloning scams guide and the rest of the scams hub.

On nuisance marketing, the ICO said on 30 July 2026 that it had executed search warrants the day before at residential and business premises linked to five companies in Bolton, Burnley, Liverpool, London and Swansea, which it believes sent a combined 170 million texts between September 2025 and May 2026. It said the public had made more than 12 million complaints about nuisance marketing texts since September 2025, up to 100,000 a day. Its advice: register with the Telephone Preference Service, report unsolicited marketing to the ICO, and forward texts to 7726.

Where to report, in short. Spam or scam texts: forward them free to 7726. Nuisance calls, texts and emails: the ICO. Fraud, where you think a scammer has contacted you: Report Fraud, then the FCA. Concerns about a claims firm: the FCA; about a solicitor: the SRA. Someone claiming to be the FCA: its helpline, 0800 111 6768.

What would change this page

This is a standing page. We will update it, and the change log at the top, when any of these happen: the Upper Tribunal confirms which hearing window applies, which was expected after the 5 and 6 October hearing; the main hearing takes place; judgment is handed down, and whether anyone appeals; the FCA publishes a new statement, a revised scheme or new deadlines, including anything that moves the 18 November, 18 January or 31 August dates; or the FCA tells lenders to handle complaints individually.

What would not change it: provisions announced by individual lenders, share price stories, or law-firm and claims-firm commentary about how much people are owed. Those are not facts about your agreement. We will not add a calculator, an eligibility checker or a form either: telling you whether you personally are owed money is regulated claims management, which we are not authorised to do.

Our sources for the live status are the FCA’s legal-challenge documents page and its consumer page, both checked on the morning of 6 October 2026. This page sits with our other money guides and scam guides; like our power-cut compensation guide, it sets out the free official route so nobody has to pay a cut to use it. The rest of our checked headlines are kept the same way.