The financial regulator has provided an update to millions of drivers awaiting more information about a significant car finance compensation program. The Financial Conduct Authority (FCA) is currently seeking input on the specifics of a compensation plan for individuals who were unfairly sold car finance agreements between 2007 and 2024 due to inadequate disclosure of broker commissions.
Drivers may be entitled to compensation if their car finance agreements included discretionary commission arrangements (DCAs), allowing brokers and dealers to raise interest rates on loans for higher commissions. Additionally, car finance agreements with high commission structures or undisclosed exclusive lender partnerships may also be eligible for compensation.
In a recent announcement, the FCA has mandated that motor finance companies must expedite the processing of complaints by two months, advancing the deadline from July 31, 2026, to May 31, 2026. Complaint handling had been on hold since January 2024, but firms are now required to start responding to and investigating complaints promptly.
Over 14 million car finance agreements could be covered by the compensation scheme, set to launch in the early part of next year. The FCA previously estimated that most affected drivers could receive approximately £700 in compensation. The FCA emphasized the importance of promptly addressing complaints and hinted at the implementation of specific rules and timeframes for handling complaints within the proposed scheme.
The FCA advised against using legal or claims management services to file complaints, suggesting that individuals can contact the lender directly for free complaint submission. Those who have already lodged complaints are likely to receive compensation sooner once the scheme is operational. Lenders are anticipated to pay out an estimated £8.2 billion in compensation.
Renowned financial expert Martin Lewis recommended that individuals submit their complaints now if they suspect they may qualify for compensation. Lewis advised individuals to proactively initiate the complaint process to ensure their cases are considered. He emphasized the benefit of taking action early, especially in instances where critical details of the car finance agreement may have been lost over time.