The financial regulator has provided an update for numerous drivers awaiting further information regarding a significant car finance compensation initiative. The Financial Conduct Authority (FCA) is presently seeking input on the specifics of a compensation program for individuals who were unfairly sold a car finance agreement between 2007 and 2024 due to inadequate disclosure of broker commissions.
Drivers may be entitled to compensation if their car finance agreement included a discretionary commission arrangement (DCAs), allowing brokers and car dealers to boost interest rates on car loans in exchange for higher commissions. Additionally, car finance agreements with high commission structures or where brokers failed to disclose exclusive partnerships with specific lenders could also qualify for compensation.
In a recent development, the FCA has instructed motor finance companies to expedite the handling of complaints by two months, advancing the deadline from July 31, 2026, to May 31, 2026. Complaint processing had been on hold since January 2024, although firms were expected to continue investigating pending complaints. Firms are now required to issue final responses to motor leasing complaints starting December 5, 2025, in accordance with standard complaint resolution protocols.
The compensation scheme, expected to launch early next year, could encompass over 14 million car finance agreements. The FCA previously estimated that most drivers might receive approximately £700 in compensation. The financial watchdog emphasized the importance of promptly addressing complaints, emphasizing that complaints cannot remain unresolved indefinitely. The FCA indicated that a scheme is likely to proceed, with specific regulations in place for handling complaints within defined timeframes.
The FCA advised against engaging lawyers or claims management firms to file complaints, encouraging individuals to contact the lender directly for free complaint submission. Those who had already lodged complaints before the scheme’s implementation are likely to receive compensation sooner. Lenders are projected to pay out an estimated £8.2 billion in compensation.
Renowned financial expert Martin Lewis advised individuals to submit complaints promptly if they suspect eligibility for compensation. Lewis emphasized the benefits of initiating a complaint to trigger a review process, particularly in older cases where detailed car finance information may have been lost. He suggested that while newer cases may seek immediate clarity on compensation eligibility, individuals not wanting the hassle of filing a complaint may not necessarily lose out.
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