Financial reimbursement for automobile loans: FCA advises motorists to steer clear of deceitful claims agencies seeking a portion of the £18bn compensation pool
The Financial Conduct Authority (FCA) has issued a warning to consumers about scammers posing as car finance lenders, promising compensation that does not exist. The FCA has yet to establish a car finance compensation scheme, but it plans to consult on an industry-wide motor finance compensation scheme in October.
In a recent landmark ruling by the Supreme Court, it was determined that in certain circumstances, the failure to properly disclose commission arrangements could be unfair and unlawful. Many motor finance firms were found to not comply with rules or the law by not providing customers with relevant information about commission paid to car dealers.
The FCA's redress scheme, if implemented, will aim to compensate customers who were mis-sold loans. The regulator estimates that its redress scheme could cost up to £18bn in total. The FCA will propose rules on how lenders should decide whether someone is owed compensation and how much, and will monitor if firms are following the rules.
Among those who have already made a claim, just under half (46%) did so using a claims management company or law firm. However, using such services could cost consumers around 30% of any compensation paid. The FCA has required CMCs to remove or amend 396 motor finance commission promotions between January 2024 and August 2025.
Of motor finance holders aware of the possibility of being owed compensation, 25% have already made a claim and a further 39% intend to. More than three quarters (79%) of motor finance customers are aware they may be owed compensation. If the scheme goes ahead, redress will be paid in 2026.
The FCA estimates most individuals will receive around £950 in compensation per agreement. Consumers who receive calls from scammers pretending to be car finance lenders should hang up immediately and not share any information, according to the FCA.
Six in 10 (61%) know about a possible compensation scheme. Among those aware they may be owed money, as many as four in 10 (41%) didn't know they would not need to use a claims management company or law firm if a redress scheme is introduced.
The FCA's consultation on an industry-wide motor finance compensation scheme will end in early October. The person who initiated the consultations for an industry-wide compensation program for motor financing in October 2021 is not publicly named in available sources.
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