Short answer
You may be owed compensation if you took out car finance through a dealer or broker between April 2007 and November 2024 and the commission was hidden or excessive. The FCA's redress scheme rules were published in March 2026, but payments are paused pending a legal challenge. You can still complain to your lender for free.
What was the motor finance hidden commission problem?
For years, car dealers arranging finance could set your interest rate within a lender-approved range and earned more commission the higher they set it. These discretionary commission arrangements, or DCAs, were rarely disclosed, so many customers paid more than necessary without knowing. The FCA banned DCAs in January 2021, and in March 2026 it published the rules for a compensation scheme covering a wider range of undisclosed commission arrangements.
When you buy a car on finance through a dealership, the dealer acts as a broker, arranging the finance on your behalf through a lender, often a bank or finance company you might not have heard of. Under a DCA, the higher the interest rate the dealer set within the lender's range, the more commission the dealer earned.
Imagine a lender allows rates between 6% and 15%. The dealer sets yours at 12% and earns a bigger commission than if they had set it at 8%. You pay more over the life of the loan, and nobody tells you this is happening.
The Financial Conduct Authority, the UK's financial regulator, banned these arrangements in January 2021 after finding they caused widespread harm to consumers. In August 2025 the Supreme Court ruled that car dealers did not usually owe customers a fiduciary duty, but that a large, undisclosed commission can make the relationship with the lender unfair under section 140A of the Consumer Credit Act 1974.
In March 2026 the FCA published the rules for a formal compensation scheme (policy statement PS26/3). It covers agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid the broker commission, so it reaches beyond DCAs alone. In July 2026 the Upper Tribunal partially suspended the scheme, on terms agreed between the FCA and four challengers: Consumer Voice and three lenders (Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance). Firms don't have to calculate or pay redress until the Tribunal has decided the challenges, which it will hear in December 2026 or February 2027. If the scheme is upheld and not appealed, the FCA expects payments to begin in 2027. If it has to be changed, payments could slip to 2028 or beyond, and the FCA has said it may instead have lenders handle complaints individually.
Am I affected by the motor finance commission issue?
You may be affected if you bought a vehicle on interest-bearing hire purchase or personal contract purchase finance in the UK, arranged through a dealership or broker rather than directly with a bank, between 6 April 2007 and 1 November 2024. DCAs were banned in January 2021, but the scheme also covers high commission and undisclosed tied arrangements. If commission is not mentioned anywhere in your paperwork, that absence is itself a warning sign.
Check whether all of the following apply to you:
- You bought a car, or another vehicle, on finance in the UK
- The finance was arranged through a dealership or broker, not directly with a bank
- The agreement was a hire purchase (HP) or personal contract purchase (PCP) deal
- The agreement was taken out between 6 April 2007 and 1 November 2024
- The loan had interest on it, meaning it was not a 0% finance deal
If you ticked those boxes, there is a good chance a discretionary commission arrangement was in place on your deal, even if it is not mentioned anywhere in your paperwork.
What about 0% finance deals?
If your finance agreement was genuinely interest-free (0% APR), a DCA was unlikely to apply, because there was no interest rate for the dealer to manipulate. These deals are generally outside the scope of the redress scheme.
How much compensation could I be owed?
The amount depends on your loan size, how far your interest rate was inflated above the minimum available, and how long the agreement ran. As a general illustration, a £10,000 loan at a rate inflated by 2 to 3 percentage points over four years could mean overpayments of roughly £450 to £700. The FCA estimates average redress under its scheme at about £829 per eligible agreement.
The FCA's redress methodology aims to put you back in the position you would have been in had the commission not influenced your rate. Redress typically includes:
- A refund of the excess interest you paid as a result of the DCA
- Interest on that amount, to reflect the time you have been without the money
- An adjustment if your agreement is still running
What does the FCA redress scheme (PS26/3) mean for me?
The FCA Consumer Redress Scheme, known as PS26/3, is a formal process requiring lenders to review agreements with discretionary, high or undisclosed tied commission arrangements and pay compensation to eligible customers. Since 2 July 2026 the calculation and payment of redress has been suspended while the Upper Tribunal hears legal challenges, with hearings listed for December 2026 or February 2027. Some lenders may contact customers directly, but you should not wait to hear from your lender before putting your complaint on record.
Will I be contacted automatically?
Some lenders may contact affected customers directly as part of the scheme. However, many consumers will need to submit a complaint themselves, especially if your lender has not yet contacted you, you want your complaint on record before any deadlines, or you have already received an offer you think is too low.
What if my lender is not part of the scheme?
Even if your lender is not participating in the FCA scheme, you may still be able to complain directly under the Consumer Credit Act 1974, using the legal test known as the 'unfair relationship' test in section 140A.
What about the Financial Ombudsman Service?
The Financial Ombudsman Service (FOS), which normally handles complaints that lenders have rejected, paused most motor finance commission complaints while the FCA designed its scheme. For complaints covered by the scheme, the FOS can usually only investigate once your lender has given you a redress decision, or the deadline for one has passed. Referring a complaint to the FOS is free.
Do I need to use a claims management company or a solicitor to claim under the FCA Redress Scheme for Car Finance?
No, you are not required to hire a claims management company or firm of solicitors to claim under the FCA Redress Scheme, but you are free to do so if you wish. Please be aware that the FCA says fees of these advisors can reach 36% including VAT so ensure you know what fees you are agreeing to. You can make exactly the same complaint yourself for free, and the FCA publishes a template letter. You do not need legal training to complain, and if your case turns out to be complex you can instruct a specialist consumer credit lawyer later. If you've already signed up with a claims firm and want to leave, any exit fee must be reasonable and reflect the work done.
The process is designed to be accessible:
- You write to your lender.
- If you disagree with the outcome you can escalate to the Financial Ombudsman Service at no cost.
Normally a lender must respond within 8 weeks under FCA rules, but complaints covered by the redress scheme follow the scheme's own timetable.
Because the Upper Tribunal has partially suspended the scheme, lenders don't have to calculate or pay redress until the legal challenges are decided, so payments are not expected before 2027.
What should you do next?
- Find your finance agreement, or ask your lender for a copy and for details of any commission paid to the dealer.
- Check the date and type of agreement. Agreements from 6 April 2007 to 1 November 2024 arranged through a dealer or broker may be in scope.
- Complain in writing to your lender, even while payments are suspended. If you are not contacted, the FCA says you can complain to the firm up to 31 August 2027.
- If your lender says you are not owed anything, ask it to review the decision, then consider the Financial Ombudsman Service, which is free.
- Check any claims management company or law firm's fees carefully before signing up. You do not need one to complain.
- Ask Libra about your own situation, and if you need a professional, find a lawyer or clinic through Libra.
Frequently asked questions
Is the motor finance redress scheme paying out yet?
Not yet. The FCA published the scheme rules on 30 March 2026, but on 2 July 2026 it suspended the calculation and payment of redress while legal challenges are heard by the Upper Tribunal, with hearings listed for December 2026 or February 2027. If the scheme is upheld, the FCA expects payments to begin in 2027.
What is the deadline to complain about car finance commission?
The FCA says consumers who are not contacted by their lender can still complain to the firm by 31 August 2027. Separate court time limits (usually six years, sometimes longer where information was concealed) apply if you want to sue instead, so do not leave it too late.
How much compensation will I get?
It depends on your agreement. The FCA estimates average redress of about £829 per eligible agreement, with around 12.1 million agreements potentially eligible. Your payment would be calculated using the scheme's methodology plus compensatory interest, rather than a fixed figure.
Does the scheme cover agreements after January 2021?
Yes, in some cases. Discretionary commission arrangements were banned in January 2021, but the scheme also covers agreements up to 1 November 2024 where commission was very high or there was an undisclosed tied arrangement between the lender and the dealer.
Did the Supreme Court rule that hidden commission was unlawful?
Not in general. In August 2025 the Supreme Court held that car dealers did not usually owe customers fiduciary duties, but it upheld one customer's claim that his relationship with the lender was unfair under section 140A of the Consumer Credit Act 1974, because of the size and concealment of the commission.
Can I claim if I bought my car on finance but have already paid it off?
Yes. The scheme covers eligible agreements even if settled, provided the agreement was an interest-bearing hire purchase or PCP between 6 April 2007 and 1 November 2024 arranged through a dealer or broker. Find your old paperwork or ask the lender for the agreement details.
Do I need to do anything if my lender contacts me about redress?
Read what it sends carefully and reply by any deadline it gives. Lenders must tell people whether they are owed compensation and how it was calculated. If you disagree with the outcome, you can complain to the Financial Ombudsman Service once the lender has given its decision.
Is the motor finance scheme running or on hold right now?
As at 30 September 2026 the scheme is in force but partly suspended. On 2 July 2026 the Upper Tribunal suspended calculation and payment of redress while legal challenges are heard. Lenders must still follow the rules not suspended. Payments are not expected until the challenges are decided.
Will making a complaint now lose me my place or rights?
No. Complaining protects your position. The FCA has said consumers not contacted by their lender can complain up to 31 August 2027. Complaining sooner puts your claim on record, and there is no charge for doing it yourself.
Can I claim for a car I bought from a dealer and financed with a bank?
Yes. This is the usual case. The dealer acts as a credit broker and receives commission from the lender, so a dealer-arranged deal with a bank or finance company can be in scope. Loans taken directly with a bank, without a dealer, generally are not.
What if I bought the car with a business or sole trader loan?
Sole traders and some small partnerships can be covered if the agreement was regulated consumer credit. Limited companies are generally not covered by the scheme. Check your agreement, and ask Libra about your situation if you are unsure which category applies.
Do I have to give up my right to sue if I accept redress?
Accepting redress under the scheme normally settles the complaint for that agreement, so you may not bring a separate claim for the same issue. Consider the offer carefully before accepting, and check how it was calculated. You can get advice on it first.
Ask Libra
- Is the FCA motor finance scheme paying out yet?
- Can I claim on a car finance agreement I have already paid off?
- Is my PCP agreement covered by the FCA redress scheme?
- How do I complain to my lender about motor finance commission?
- My lender says I am not owed anything. What can I do?
- Should I use a claims company for my car finance claim?
Sources
- FCA confirms motor finance redress scheme (FCA)
- Motor finance scheme partially suspended (FCA, July 2026)
- PS26/3: Motor Finance Consumer Redress Scheme (FCA)
- Complaints about car finance commission (Financial Ombudsman Service)
- Consumer Credit Act 1974, section 140A (legislation.gov.uk)
- Hopcraft v Close Brothers Ltd [2025] UKSC 33 (UK Supreme Court)
This guide is general information about the law in the UK as at September 2026, not legal advice. For advice on your situation, ask Libra or find a lawyer through Libra.
.png)