Jack Grey
Live reporter

Image source, Getty Images

Millions of car owners in the UK are set to receive hundreds of pounds of compensation after being mis-sold car finance between April 2007 and November 2024, the Financial Conduct Authority (FCA) has announced.

It is an announcement that many motorists have waited years for, and will see lenders facing a bill of £9.1bn.

Who will see compensation?

• The FCA says 12.1 million agreements are eligible for compensation, with each agreement seeing an average payment of £829 per agreement.
• An agreement is eligible if the driver was not told about at least one of: a discretionary commission arrangement (DCA); a high commission arrangement of at least 39% of the total cost of credit and 10% of the loan; or a right of first refusal, except where the lender can prove there were visible links with the manufacturer and dealer

• You can read the full breakdown of which agreements are eligible in our earlier post

When will compensation be paid?

• The FCA says "millions", but not everyone, will receive their compensation this year
• Those that have already complained will get their compensation first, the FCA's CEO Nikhil Rathi says, emphasising that consumers do not need a law firm or claims management company to complain

• Firms are being given up until the end of June 2026 to handle complaints for loans taken out from 1 April 2014, and until the end of August 2026 for loans agreed earlier

What has the reaction been?

• Money expert Martin Lewis has urged those that have taken finance out within the specified time frame to "put a complaint in", as otherwise you will not know if you have been mis-sold
• Twenty-five-year-old consumer, Fletcher Mumford, tells the BBC he's hopeful today's decisions will get things moving after more than two-years of "generic emails" and a lack of information

We're about to close this live page but you can continue reading about car finance payouts with our latest story.

Kevin Peachey
Cost of living correspondent

Sally in Norwich asks if lenders will be paying interest on the amount they owe in compensation?

Yes, they will pay interest, but there has been some heated debate over this.

The Financial Conduct Authority (FCA) says interest will be paid on compensation, based on the annual average Bank of England base rate per year plus 1%, at a minimum of 3% in any year.

But lawyers say this is too low.

Other redress schemes and judgements have seen interest of 8% paid.

Kevin Peachey
Cost of living correspondent

Susan has been in touch to ask who the right person to complain to is if you think you could be eligible - the car dealers or the Financial Conduct Authority (FCA)?

Anyone who thinks they are affected should complain to their lender.

The earlier you complain, the quicker it should be dealt with. There is help on the FCA's website, external.

People can choose to use a claims management company or law firm, but that may come with fees and the provider taking a cut of any payout.

We've been seeing reaction from figures in the motor finance industry via the PA news agency.

Several have been reacting to the Financial Conduct Authority's compensation plans since they were announced:

• It's important that drivers "actually receive compensation quickly, clearly and without hassle", the CEO of digital car finance company Carmoola, Aidan Rushby, says. The redress must be applied "proportionately and consistently", he adds
• Peter Rothwell, head of banking at KPMG UK,says the announcement "gives lenders and the market greater clarity"
• The FCA's approach is "pragmatic and proportionate" and avoids having a large effect on a market that "has adapted and is now working well for consumers", Autotrader's director of automotive finance, Rachael Jones, says

• Meanwhile, lender Close Brothers says it's "assessing the potential implications" of the compensation scheme, after previously accounting for a £300 million provision to cover redress payments

Money and finance expert Martin Lewis tells BBC Radio 4's PM programme the "most important thing to understand" with the compensation scheme is that consumers will "have no idea" if they were mis-sold car finance unless they complain.

"So you should put a complaint in," he says, adding that under the scheme finance firms must respond to people who have complained, but also must find those who are eligible but have not complained.

"You want to be in the complained camp," Lewis says.

He explains that payouts for people who have complained will likely come first and some firms may have lost customer information, or struggle to get in touch, if a customer's contact details have changed.

Esyllt Carr
Business reporter

The Financial Conduct Authority (FCA) has said an implementation period for the car finance payout scheme will now begin to allow firms time to handle complainants' cases.

Here's what the FCA says that involves:

• Firms are being given up until the end of June 2026 for loans taken out from 1 April 2014, and until the end of August 2026 for loans agreed earlier
• People who have already complained, or who put their complaint in before the end of that period, should be contacted by their lender within three months of those dates
• Lenders will tell them whether they are owed any compensation, and how much
• The FCA says those unhappy with the amount offered can complain via the free Financial Ombudsman Service, which will check that lenders are sticking to the rules
• Firms have another six months to contact people who haven’t complained if they are potentially owed money, or are timed out of the scheme
• If contacted, consumers must respond within six months if they want to join the scheme
• People who are not contacted at all can still complain to their firm until the end of August 2027

Image source, Fletcher Mumford

We've just been hearing from Fletcher Mumford, who has been trying to claim back mis-sold car finance for more than two years.

He tells BBC Radio 5 Live that he's repeatedly contacted his lender but hasn't heard back from them despite emailing, writing, and phoning.

"I get a generic email saying that they've got a high volume of people contacting them at the moment, but when I phone them I get through to a person who can't really tell me any information," he says.

Mumford says he's hopeful that today's decision will help his claim progress quicker. But "it's been two years and that does feel like a very long time to come to some sort of idea or decision", he says.

Anders Nilsson, from car finance company Carmoola, tells BBC Radio 5 Live that the scheme announced today by the FCA is a "long time coming".

People "just wanted clarity" on the compensation scheme, he says, adding that drivers do not have to do anything immediately to seek payouts.

He says: "The onus is on the lenders to contact the customers."

Nilsson adds that a "key" aspect of the scheme is drivers not having to use claim management firms to pursue their complaints.

We want to know what you think about the compensation plans outlined a short while ago by the Financial Conduct Authority.

You can get in touch with us in the following ways:

• Email: yourvoice@bbc.co.uk, external
• WhatsApp: +44 7756 165803, external
• Upload your pictures and video

Please read our terms & conditions and privacy policy

 In some cases a selection of your comments and questions will be published, displaying your name and location as you provide it unless you state otherwise. Your contact details will never be published.

The Financial Conduct Authority says eligibility for compensation has been tightened, meaning 12.1 million agreements are now eligible for compensation - down from 14.2 million at the consultation stage.

Under the new scheme, drivers will only be eligible for compensation if they were not told details of at least one of three arrangements between the lender and broker.

These include:

• A discretionary commission arrangement (DCA), which allowed brokers to adjust the interest rate customers paid to secure a higher commission
• A high commission arrangement of at least 39% of the total cost of credit and 10% of the loan
• Contractual ties that gave a lender exclusivity or a right of first refusal, except where the lender can prove there were visible links with the manufacturer and dealer

Several exceptions are also in place, such as cases where the borrower wasn't charged interest or where a DCA was not used to earn discretionary commission.

Consumers generally have six years to make a claim, but this could be extended where information about commission or a link was deliberately concealed, the FCA says.

Image source, ITN

Speaking after the Financial Conduct Authority (FCA)'s announcement, its CEO Nikhil Rathi says millions of people will receive their compensation in 2026.

He says it will put £7.5 billion "into people's pockets", with 12.1 million agreements eligible for compensation and the average payment being £829 per agreement.

The scheme is the "quickest, fairest, most cost effective way" for consumers to get compensation, Rathi says, adding it is "not especially likely" that consumers could get more compensation if they were to take their claims to court.

Those who have already complained will get their payments sooner, he says, encouraging eligible consumers to lodge their complaints now and advising that this does not require using a law firm or claims management company.

Kevin Peachey
Cost of living correspondent

Millions of drivers who were mis-sold car finance agreements should receive compensation this year, under plans by the regulator.

The Financial Conduct Authority's (FCA's) final plans should see most of the remainder by the end of 2027. After tightening criteria following consultation, some 12 million agreements will be considered unfair and due compensation. Payouts will average £829, bringing the total cost to lenders to £9.1bn.

The vast majority of new cars, and many second-hand ones, are bought with finance agreements.

Image source, Getty Images

In 2021, the FCA banned deals where car dealers received commission from lenders, based on the interest rate charged to the customer. These were known as discretionary commission arrangements (DCAs) and were often not disclosed.

The FCA has said this provided an incentive for a buyer to be charged higher interest rates than necessary, leaving them paying too much.

The regulator's central compensation scheme allows people to complain and potentially receive compensation for mis-sold deals, without the need for a lawyer or to go through the courts. Some may still decide to take a legal route.

The FCA scheme could still be challenged by lenders and lawyers. Major lenders have set aside tens of millions of pounds to cover the cost of compensation.

More now from the Financial Conduct Authority's announcement.

It says that courts have found that firms "broke the law by failing to disclose important information to customers" and that an "industry-wide scheme is the quickest and most cost effective way to deliver fair compensation".

It continues: "Our final approach is fair for consumers and proportionate for firms. We have tightened eligibility so only those treated unfairly receive compensation.

"We have adjusted how compensation is calculated to better reflect greater loss between 2007-2014."

It adds that firms are expected to pay out around £7.5bn, which is down from £8.2bn at consultation.

The total bill for firms is estimated to be £9.1bn, once other costs are taken into account.

Millions of motorists that were mis-sold car finance will be eligible for compensation, the Financial Conduct Authority (FCA) has announced.

Our teams are currently working through the FCA's announcement, stick with us and we'll bring you further updates shortly.

The industry is expected to cover the full costs of any compensation scheme, including any administrative costs.

Lenders - including some of the UK's biggest banks and specialist motor finance firms - have already set aside more than £3bn for potential payouts.

A few banks have announced they have raised their provisions, and have suggested there are risks to future lending from costs associated with compensation. Evidence for such a claim is unclear.

The Financial Conduct Authority (FCA) expects average payouts of £700 per mis-sold agreement.

This is lower than its previous estimate, which suggested compensation payments of less than £950 per deal.

It means the total cost of the redress is likely to be at the bottom end of its estimate - about £8.2bn.

The director of the body that represents the lending industry said it thought the FCA was "overcompensating".

"We don't recognise losses on that scale," said Adrian Dally from the Finance and Leasing Association, adding that the number of people the regulator said lost out "seems implausibly high".

We're expecting a statement from the Financial Conduct Authority (FCA) on its decision about a payout programme for 14 million motor finance arrangements shortly.

We'll let you know what it says as soon as we have it and will bring you analysis and reaction.

A ruling by the UK's highest court in August 2025 found in favour of the finance companies in two of the cases under consideration, which narrowed the scope of the number of people who can claim compensation.

The decision reversed earlier court rulings that had opened the possibility of widespread compensation claims from motorists on a similar scale to the PPI mis-selling scandal.

However, it upheld the test case of Marcus Johnson, who bought his first car - a Suzuki Swift - in 2017, meaning many drivers who took out a certain type of finance deal could still be in line for payouts.

Image source, Marcus Johnson

He was not told that the car dealership was being paid 25% commission, which was added on to the amount he had to pay back.

"I signed a few documents and then drove away in the car," he told the BBC.

Marcus Johnson said he had no option but to use finance when he bought the car, describing it as "heartbreaking" to find out so much extra money had been taken.

• Read more on last year's Supreme Court ruling in our story

The vast majority of new cars, and many second-hand ones, are bought with finance agreements.

About two million new and used cars are bought each year under motor finance, or roughly nine in 10, according to the Financial Conduct Authority (FCA).

The FCA has previously said payouts could result from 14 million motor finance agreements taken out between April 2007 and November 2024, which amounts to about 44% of the total number during the period.

However, a ruling from the Supreme Court - the UK's highest court - from August last year reduced the scope of compensation when it ruled in favour of finance companies in two out of the three crucial test cases it considered. More on that ruling in our next post.

Kevin Peachey
Cost of living correspondent

Michael Waller, from Bexley, bought two cars on finance a decade or more ago.

“I bought them basically for my job, which was as a salesman. I went all over the country doing tens of thousands of miles in both of them," he tells the BBC.

“Years on I’ve realised that, in both cases, I’ve been hoodwinked.”

He no longer had the paperwork, so made a claim through Courmacs Legal - a law firm representing more than a million drivers.

Michael Waller argued that the principle, rather than the money, meant he wanted to take his case through the courts rather than using the Financial Conduct Authority scheme.

Image source, Getty Images

The payout details that we'll hear about today relate to the commission arrangements between lenders and dealers, unfair contracts and inaccurate information given to car buyers.

Finance agreements where car dealers received commission from lenders, which was based on the interest rate charged to the customer, were banned by the Financial Conduct Authority (FCA) in 2021.

Such deals were known as discretionary commission arrangements (DCAs) and were often not disclosed to buyers.

The FCA has said these arrangements functioned as an incentive for buyers to be charged higher interest rates than necessary, leaving them paying too much.