FCA unveils £8.2bn motor finance compensation scheme
FCA unveils £8.2bn motor finance compensation scheme

FCA unveils £8.2bn motor finance compensation scheme

4 minute read|8th Oct 2025

The Financial Conduct Authority (FCA) has estimated that drivers across the UK could receive an average of £700 per motor finance agreement, following a compensation scheme proposed by the regulator.

There are 14 million unfair policies that could be claimed on – and payments could start next year.

The FCA estimates that the total compensation from lenders could reach approximately £8.2 billion.

Investigations revealed that motor finance companies breached laws and regulations by failing to disclose key information.

This lack of transparency created unfair conditions where salespeople were incentivised to charge higher interest rates to increase their commission. This prevented consumers from negotiating better terms and, in many cases, resulted in higher loan costs.

To address this, the FCA proposes a streamlined compensation scheme designed to efficiently deliver redress to affected individuals.

According to FCA-commissioned research, 46% of people aware of potential compensation but yet to claim cited uncertainty about eligibility as a major barrier.

Additionally, 24% were deterred by unclear expectations around the amount they might receive.

Encouragingly, 81% of those considering a claim said that a formal compensation scheme would give them the confidence to proceed.

Nikhil Rathi, chief executive of the FCA, said: "Many motor finance lenders did not comply with the law or the rules.

“Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement. 

"We recognise that there will be a wide range of views on the scheme, its scope, timeframe and how compensation is calculated.

“On such a complex issue, not everyone will get everything they would like. But we want to work together on the best possible scheme and draw a line under this issue quickly.

“That certainty is vital, so a trusted motor finance market can continue to serve millions of families every year."

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