How to claim compensation for mis-sold car finance

Following a Supreme Court decision earlier this year, the FCA has announced a proposed compensation scheme for people affected by mis-sold car finance. 

Under the scheme, the FCA estimates that anyone eligible for compensation will receive an average payout of £700 per agreement. Payments are likely to begin in mid-2026. 

The FCA has said that customers who submit a complaint before the scheme begins are likely to get their compensation faster. You can check the latest information about car finance claimsOpens in a new window on the FCA website.  

You won’t have to make a complaint to get compensation, as under the FCA’s proposed scheme companies will need to contact affected customers asking them if they want to opt in. 

However, the FCA have also said that people who have already complained could receive their payouts up to three months earlier than those who haven’t. 

So, you won’t miss out if you don’t complain. But if you want your money faster, complaining is likely to help. It will also make sure that your lender has your most up-to-date contact details.     

Based on the FCA’s proposed compensation scheme, you’re likely to get a payout if your car finance agreement included any of the following, and you weren’t properly told about it: 

• a discretionary commission arrangement (DCA)
• unfairly high commission 
• a contractual tie. 

Your motor finance deal also needs to have been: 

• agreed between 6 April 2007 and 1 November 2024 
• either a Personal Contract Purchase (PCP) or a Hire Purchase (HP). 

DCAs were a type of hidden commission that allowed dealers and brokers to increase the commission they earned by charging customers more. 

The best way to find out if your agreement had a DCA is to check through your car finance paperwork, if you still have it. If this isn’t possible, you can ask your lender.   

Even if your lender won’t tell you, they’ll still need to pay you compensation if your agreement included a DCA. 

DCAs were outlawed in January 2021. So, no car finance agreements made since then will include a DCA. 

Some firms have claimed that they never used DCAs. You can see a list of companies not using DCAsOpens in a new window on MoneySavingExpert.  

You will be eligible for compensation if your agreement included commission that was over:  

• 35% of the total cost of credit, and  
• 10% of the overall loan.  

However, many agreements won’t have made these figures clear. You can either:   

• contact your car finance dealer to ask if you were charged unfairly high commission (and submit a complaint if you were), or   
• wait for the compensation scheme to begin, as lenders will contact affected customers asking them if they want to opt in for their agreement to be reviewed.   

Some motor finance agreements were mis-sold because a contractual tie existed. This means that the dealer had an agreement with a lender to only offer you their finance option rather than searching the market for a better deal.   

If you weren’t told about this, you’ll be eligible for compensation. To find out, you can either: 

• contact your car finance dealer to ask if your agreement had a contractual tie (and submit a complaint if it did), or  
• wait for the compensation scheme to begin, as lenders will contact affected customers asking them if they want to opt in for their agreement to be reviewed. 

The FCA estimate that customers will receive an average of £700 per mis-sold car finance agreement.

Avoiding a claims management company or law firm will ensure that you receive the full amount of money that you’re owed. 

If you’re thinking of complaining, it’s a good idea to use a free template letter so that you an be sure you’ve included everything you need to. 

There is a free complaint letter template availableOpens in a new window on the FCA’s website.

Gather any information about your car finance.  Then complain to your lender, ideally in writing. 

You’ll need to complain to the firm you were paying each month. If you’re not sure who that is, you can check your credit report (if the agreement was active in the past six years) or old bank statements if you have them.

Tell the lender you think you’ve been mis-sold car finance and include as much information as you have. 

You should get a response from the lender to confirm that they’ve received your complaint within eight weeks. If you don’t hear anything, contact the firm again to check if they received it.

Ideally, your lender will then respond to let you know if you're eligible for compensation. However, the FCA has given firms extra time to respond to complaints, so you might not hear back until the scheme starts, which is likely to be in early 2026.

You can get step-by-step information about when you can expect a responseOpens in a new window on the FCA website. 

Once your complaint has been logged, you won’t need to do anything more for now. You’ll be contacted by your lender once the compensation scheme begins. 

The FCA is currently consulting on the proposed compensation scheme. They’re expecting the scheme to begin in early 2026.

The scheme hasn’t been confirmed yet, so some of these timings could change. 

Once the scheme starts, your lender will invite you to join within:  

• three months if you’ve already complained – they’ll ask if you want to opt out of the scheme 
• six months if you haven’t complained – they’ll ask if you want to opt in.  

Once you’ve joined the scheme: 

• your lender will confirm if you’re owed compensation, along with how much you’ll get, within three months  
• you’ll be paid the amount you’re owed within the next 28 days.    

If your lender doesn’t have your details anymore, they might not be able to contact you. You’ll need to reach out to them instead, and you’ll need to do this within a year of the scheme starting. 

Some people have been contacted by fraudsters pretending to be from car finance lenders. They will offer fake compensation as a way to trick people into giving their personal details. 

The compensation scheme hasn’t begun yet, so anyone contacting you to offer a payout is a scammer. 

To learn more about what to watch out for, view our guide Am I being scammed? How to tell if you’ve been targeted.