Where things stand
The FCA published the final rules for its motor finance compensation scheme on 30 March 2026 (policy statement PS26/3). Four parties then challenged the scheme at the Upper Tribunal: Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance and the campaign group Consumer Voice. Other big lenders, including Black Horse, Santander and Close Brothers, said they wouldn't challenge it.
On 2 July 2026 the Tribunal suspended parts of the scheme, on terms agreed between the FCA and the four challengers. Until the challenges are decided, lenders don't have to calculate or pay compensation, or send letters about compensation owed under the scheme. The Tribunal will hear the challenges on 14 to 18 December 2026 or 16 to 26 February 2027, with a decision expected in the months after.
The scheme hasn't been cancelled. It's still law, and lenders still have to follow the parts that aren't suspended. The FCA says the best thing to do if you're concerned is to complain to your lender. Latest news.
Timeline
The Court of Appeal rules that dealers acting as brokers owed customers duties over commission.
The Supreme Court overturns most of that ruling but finds one customer, Mr Johnson, had an unfair relationship with his lender because of how his commission was hidden.
The FCA consults on an industry-wide compensation scheme (CP25/27).
The FCA publishes final rules (PS26/3), split into two schemes by agreement date.
The pause on lenders answering car finance complaints ends. Complaints outside the scheme are handled normally again.
The Upper Tribunal suspends parts of the scheme while it hears four legal challenges.
The Tribunal hears the challenges.
Who the scheme covers
The scheme covers regulated motor finance used to buy or hire a car, van or motorbike, taken out between 6 April 2007 and 1 November 2024, where the lender paid commission to the broker (usually the dealer). It's split in two:
- Scheme 1: agreements taken out from 6 April 2007 to 31 March 2014.
- Scheme 2: agreements taken out from 1 April 2014 to 1 November 2024.
The split exists because the FCA only took over regulating consumer credit on 1 April 2014, and some firms argue it can't run a scheme for earlier agreements. Splitting it means a challenge to the older agreements doesn't hold up the newer ones.
What makes an agreement unfair
The scheme treats an agreement as unfair if one or more of these applied and weren't adequately disclosed:
- A discretionary commission arrangement. The dealer could set your interest rate and earn more commission the higher it was. How these worked.
- High commission. At least 39% of the total cost of credit and at least 10% of the loan.
- A tie between dealer and lender. For example, the lender having first refusal on the dealer's customers.
Lenders can only rebut this in narrow cases, with evidence from the time. Where records are missing, the scheme presumes disclosure wasn't adequate.
What isn't covered
- Agreements where the commission was £150 or less (£120 or less in Scheme 1).
- Agreements with no interest (0% finance).
- Very large loans: those bigger than 99.5% of loans issued that year. You can still complain about these to the lender and the Ombudsman.
- Some tied arrangements between a manufacturer, its finance company and its franchised dealers, where the link was clear.
- Cases where the lender can show the customer wasn't treated unfairly or lost nothing.
How compensation is worked out
Most people get a figure based on the average of two things: the commission paid, and an estimate of how much extra interest you paid. That estimate uses an adjustment to your APR of 17% for Scheme 2 and 21% for Scheme 1. Interest is added on top. The total is capped so it can't exceed certain limits, including 90% of the commission plus interest.
Cases like Mr Johnson's, with very high commission (at least 50% of the cost of credit and 22.5% of the loan) plus an undisclosed tie or discretionary commission, get the commission back in full with interest. There's no cap on those.
When it finalised the scheme, the FCA estimated total compensation of about £7.5 billion across around 12.1 million agreements, an average of about £830 each. More on how much you could get.
How you take part
If you've already complained to your lender, the scheme includes you unless you opt out. If you haven't, lenders have to contact customers who may be owed money and invite them to opt in, with a deadline to reply. Under the original timetable, the window for people to complain to their lender stays open until 31 August 2027. The suspension may change these dates.
You have three routes: complain to your lender yourself, wait for your lender to contact you, or use a claims company to find all your agreements and deal with each lender for you. Should you use a claims company?
Sources
Checked on 7 October 2026 against:
Questions people ask
Has the car finance compensation scheme been cancelled?
No. The scheme was made on 30 March 2026 and is still in force. Parts of it are suspended while the Upper Tribunal hears four legal challenges, so lenders don't have to pay compensation under it yet.
When will car finance compensation be paid?
Not until the legal challenges are decided. The Upper Tribunal hears them in December 2026 or February 2027, with a decision expected in the months after. Payments under the scheme are unlikely before 2027.
Should I complain now or wait?
The FCA says the best thing to do if you're concerned is to complain to your lender. People who have already complained are included in the scheme automatically and are dealt with first under its timetable.
Does the scheme cover PCP?
Yes. It covers regulated credit agreements including PCP, hire purchase and conditional sale, used to buy a car, van or motorbike. PCP claims explained.
You don't have to use a claims management company. You can complain to your lender, and then to the Financial Ombudsman Service, for free.