Car Finance Compensation: The FCA Scheme, Its Current Status and Free Options

The Financial Conduct Authority's car finance redress scheme is real, but as of 28 September 2026 it was on hold: the Upper Tribunal partially suspended it from 29 June 2026 while four parties challenge it, in a case the FCA said was due to be heard in December 2026 or February 2027, and until the Tribunal process concludes lenders do not have to calculate or pay compensation on the scheme's original timetable. You can still complain to your lender for free right now, and the free Financial Ombudsman Service remains available whatever the legal challenge decides. This page never estimates what any individual reader might receive, because that depends on the details of each agreement.

The scheme is suspended, not cancelled: know the current status first

If you have heard about car finance compensation, the single most important thing to know right now is that the Financial Conduct Authority's redress scheme was not, as of 28 September 2026, paying out on its original timetable. The Upper Tribunal has partially suspended the scheme while it hears a legal challenge from three lenders, Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance, and from Consumer Voice, which argues the scheme will significantly under-compensate consumers. The Tribunal's suspension order, released on 1 July 2026 and treated as taking effect from 29 June 2026, suspends the affected rules "until further order of the Tribunal or until the final determination of the Applications" (Upper Tribunal: motor finance suspension order), and the FCA announced the partial suspension on 2 July 2026. As of 28 September 2026, no judgment had been given. The FCA's own statement is direct about the effect: "firms are not required to calculate or pay redress, or send communications about compensation owed under the scheme, in line with the scheme timetable until the Upper Tribunal process concludes" (FCA: motor finance scheme partially suspended).

On 2 July 2026 the FCA said the Tribunal had confirmed the challenge would be heard on 14 to 18 December 2026 or 16 to 26 February 2027, the final dates depending on any applications for further expert evidence or disclosure, with a judgment expected in the following months. Depending on the outcome, in the FCA's own words: "If the scheme is upheld, and the judgment isn't appealed, we expect payments under the scheme to begin in 2027." If the scheme is overturned in whole or part, the FCA says a revised scheme "could face further legal challenge, and compensation could be delayed until 2028 or beyond," so it "may instead tell lenders to resolve complaints individually under the usual complaints process," in which case lenders would need to respond within 8 weeks and you could take your complaint to the Financial Ombudsman Service.

Firms are not doing nothing during the suspension. They must still identify which agreements and complaints are potentially affected, gather the commission disclosure data needed to assess them, tell people who have complained and are not owed compensation under the scheme, with some exceptions, including where the lender says the complaint is out of time, and continue cooperating with the Financial Ombudsman Service on complaints already referred to it. What is paused is calculating and paying redress, and sending compensation offers, against the scheme's original dates.

How this started: Johnson v FirstRand and the Supreme Court

The FCA built a scheme rather than leaving this to case by case litigation because of how narrowly the Supreme Court decided the underlying legal question. In Johnson v FirstRand Bank Ltd, alongside Hopcraft v Close Brothers and Wrench v FirstRand, decided together on 1 August 2025, the Supreme Court rejected all three customers' broadest legal theories: that a car dealer arranging finance owes the customer fiduciary duties, and that an undisclosed commission is automatically a bribe (Supreme Court: Hopcraft, Johnson and Wrench press summary). Those theories, if accepted, would have made almost any undisclosed dealer commission automatically actionable.

Only Mr Johnson succeeded, and on a different, narrower basis: an unfair relationship claim under section 140A of the Consumer Credit Act 1974. The Court's reasoning turned on the specific facts of his case: the undisclosed commission was very large, 25% of the credit advanced and 55% of the total charge for credit, the paperwork falsely implied the dealer had surveyed "a select panel of lenders" when the lender in fact had a right of first refusal, and no prominence was given to the relevant disclosures. His remedy was the commission repaid to him with interest. That fact sensitive test is why the FCA moved to build a structured redress scheme with its own eligibility rules, rather than expecting every affected customer to bring a similar case.

What the FCA scheme actually covers

The FCA's final rules, set out in Policy Statement PS26/3 of 30 March 2026, cover regulated motor finance agreements, such as hire purchase, personal contract purchase and conditional sale, for a car, motorbike, van or other motor vehicle, taken out between 6 April 2007 and 1 November 2024, where the lender paid a commission to the broker or dealer (FCA: PS26/3, motor finance redress scheme). The scheme is split into two periods, Scheme 1 (6 April 2007 to 31 March 2014) and Scheme 2 (1 April 2014 to 1 November 2024), a structural choice designed so that a legal challenge to the older period does not automatically delay the more recent one.

Eligibility is not automatic

Not every agreement with a dealer commission is covered. Under PS26/3, a relationship is presumed unfair, and so eligible, only where there was inadequate disclosure of at least one of: a discretionary commission arrangement; a high commission arrangement, defined as commission equal to or above 39% of the total cost of credit and 10% of the loan amount; or an undisclosed contractual tie or right of first refusal between the dealer and lender (FCA: CP25/27, motor finance consultation). A flat fee, adequately disclosed, non tied commission below that threshold does not meet the scheme's own eligibility test. Anyone whose complaint the Financial Ombudsman Service has already decided on its merits, whose claim a court has already decided, or who has already accepted compensation on the same agreement is excluded from the scheme, since their case has already been resolved. The scheme also treats a case as fair, so no compensation is owed, where the commission was £120 or less (agreements before 1 April 2014) or £150 or less (from that date) or no interest was charged, and very high value loans (above 99.5% of loans that year) are outside the scheme, though those borrowers can still complain to their lender and then the Financial Ombudsman Service (FCA: PS26/3).

Why the payment timetable is on hold, and what happens next

Before the legal challenge, the FCA's rules set a detailed timetable: an implementation period originally ending 30 June 2026 for Scheme 2 and 31 August 2026 for Scheme 1, confirmation of amounts owed to people who already complained originally due by 30 September 2026 for Scheme 2, invitations to opt in for people not yet contacted originally due by 31 December 2026 (Scheme 2) or 28 February 2027 (Scheme 1), and the last people invited to join originally due to accept or challenge their offers by 31 October 2027 (Scheme 2) or 31 December 2027 (Scheme 1). Those dates describe the scheme's original design. They are not the current operative timetable: the Upper Tribunal's suspension order means firms are not currently required to meet them, and the actual timing now depends on when the Tribunal rules and what it decides.

You do not need a claims firm

The FCA has said this plainly and repeatedly, and it applies whatever happens with the legal challenge: you do not need to use a law firm or claims management company, "which may charge you over 30% of any compensation" (FCA: motor finance scheme partially suspended). Complaining to your lender is free. The FCA did not create a scheme specific fee cap, but the existing fee cap regime for financial services claims generally, from 15% to 30% plus VAT depending on the amount of redress, applies to claims management companies and solicitors who do take a cut. The Financial Ombudsman Service is also free to use, both within the scheme and as an alternative to it.

Scotland and Northern Ireland

The scheme's rules, deadlines and eligibility test are the same across England, Wales, Scotland and Northern Ireland, since motor finance regulation is a reserved matter. But the time limit used to decide whether a case is out of time, inside the scheme and in court, depends on which nation's law applies. In England, Wales and Northern Ireland, a section 140A claim is generally subject to a 6 year limitation period, though where the lender or dealer deliberately concealed a relevant fact, the period does not start until the concealment was, or reasonably could have been, discovered. Scotland works differently: it uses prescription rather than limitation, and the FCA's view, set out in the scheme rules, is that no prescription period applies to these claims. But two recent Outer House decisions have been read as applying a 5 year period (the FCA disputes that reading), a court is not bound by the FCA's view, and the FCA says the legal challenge includes how the scheme identifies out of time complaints. If you are in Scotland, do not delay a complaint or claim on the strength of the FCA's view.

What you can do right now

You do not need to wait for the Upper Tribunal to decide anything before complaining. You can complain to your lender directly now, and that complaint is free, whether or not you are contacted under the scheme. The scheme rules set 31 August 2027 as the last date for people not contacted to complain, but that timetable depends on the outcome of the legal challenge, and the FCA's own advice is that "the best thing you can do, if you have concerns, is to complain to your lender" (FCA: car finance complaints). If your lender rejects your complaint, or you are told you are not owed anything and disagree, the Financial Ombudsman Service is a free next step, and it remains available whatever the legal challenge decides. See our related guide on how to complain effectively about a financial product, and the UK consumer rights hub for other free official compensation routes, including data breach compensation and flight delay compensation.

Frequently Asked Questions

Is the FCA car finance compensation scheme paying out now?

Not as of 28 September 2026. The Upper Tribunal partially suspended the scheme from 29 June 2026 while it hears a legal challenge from three lenders and Consumer Voice, which the FCA said was due to be heard in December 2026 or February 2027. Until the Tribunal process concludes, firms do not have to calculate or pay redress on the scheme's original dates.

What happened in Johnson v FirstRand?

The Supreme Court decided the case on 1 August 2025 and rejected the broadest legal theories that an undisclosed dealer commission is automatically a bribe or a breach of fiduciary duty. Only Mr Johnson succeeded, on a narrower unfair relationship claim under section 140A of the Consumer Credit Act 1974, based on the specific facts of his agreement.

Do I need to do anything while the scheme is suspended?

You can complain to your lender directly now, for free, whether or not you have been contacted. You do not need to wait for the Upper Tribunal's decision, and the FCA advises complaining now if you have concerns.

Do I need a claims management company to use the scheme?

No. The FCA says directly that the scheme is free and you do not need a claims management company or solicitor, and that one may charge you over 30% of any compensation.

What happens if the Upper Tribunal overturns the scheme?

The FCA says it would need to decide what to do next. Consulting on a revised scheme could face a further legal challenge and delay compensation until 2028 or beyond, so it may instead tell lenders to resolve complaints individually under the usual complaints process: lenders would need to respond within 8 weeks, and you could take your complaint to the Financial Ombudsman Service if you think you have not been treated fairly.

Is there a time limit on car finance claims in Scotland?

The FCA's view, written into the scheme's rules, is that Scottish law sets no prescription period for these unfair relationship claims, unlike the 6 year limitation period that generally applies in England, Wales and Northern Ireland. But two recent Outer House decisions have been read as applying a 5 year period (the FCA disputes that reading), a court is not bound by the FCA's view, and the scheme's out of time rules are part of the current legal challenge, so do not delay a complaint or claim on the strength of it.