Recent PCP (Personal Contract Purchase) statistics show that around 90% of new car sales are financed. As the cost of living continues to rise, financial circumstances change with it, making car finance the cheaper option for many.
But with 40% of pre-2021 car finance deals charging lenders hidden commissions, millions could now be in line for compensation. The FCA has launched an awareness campaign about this, and is proposing a free, industry-wide motor finance compensation scheme for 2026.
So if you bought a car, van or motorbike on PCP or HP (Hire Purchase) before 28th January 2021, you could be due a pay-out. You can check whether you’re entitled to compensation via Money Saving Expert’s free car finance reclaim tool.
Motor Finance Compensation at a Glance: Key Statistics from the FCA
- 79% of motor finance customers are aware they may be owed compensation.
- 61% of those are aware of a possible compensation scheme.
- 41% of those aware of being owed compensation didn’t know they would not need to use a CMC (Claims Management Company) or law firm if a redress scheme is introduced.
- 25% of those have already made a claim and a further 39% intend to.
- Among those who have already made a claim, 46% did so using a CMC or law firm.
- Using a CMC or law firm could cost consumers around 30% of any compensation paid.
Who is the FCA?
The FCA is the Financial Conduct Authority. They are an independent public body established by an Act of Parliament, funded by the fees from the firms it regulates. Here’s a breakdown of what they do:
- Regulate financial services firms in the UK: The FCA regulates the conduct of around 42,000 UK businesses and prudentially supervises around 41,000 firms.
- Protect consumers financially: Their regulation ensures consumers are well served and firms operate with clarity.
- Enforce prosecutions on non-conforming firms: If firms fail to meet the FCA’s standards, they take action to prevent financial harm to consumers. This can include criminal prosecutions.
Why are they raising awareness of motor finance compensation?
The aim behind the FCA’s new campaign is to make people aware that if they are owed motor finance compensation, they don’t need to use a Claims Management Company (CMC) or law firm to make a claim if a redress scheme is introduced.
Claiming via a CMC or law firm usually means forfeiting as much as 30% of your claim via fees that these companies charge individuals to make claims on their behalf.
Where can I keep up with the FCA’s motor finance compensation campaign?
Over the next two months, the FCA will be collaborating with a number of social media influencers who’ll be posting information for consumers across Instagram and TikTok. Online video and radio ads will also be launching in October.
Will the FCA be introducing a motor finance compensation scheme?
While it has not yet been confirmed, the FCA plans to launch a consultation for its proposed, industry-wide motor finance compensation scheme in early October. If this goes ahead, the first payments should be made in 2026.
Is there anything I should watch out for in the meantime?
Yes, the FCA continues to warn consumers about scammers pretending to be car finance lenders and falsely claiming people are owed compensation. This is despite there being no compensation scheme in place yet.
If you receive a call like this, please hang up immediately and don’t share any information.
For more advice, please read our creditor guide to car finance.
Have you borrowed more than you can afford?
Car finance is often the cheaper option for many, but there are risks you should take into account before going ahead with the loan. If your financial circumstances change, it could be harder to afford your repayments in the long-term.
If you’re struggling to pay off your car finance debt, we can help. Contact Angel Advance to receive free*, confidential debt advice today. Our friendly debt advisors are available to chat over the phone, online, via email, through WhatsApp or in a webchat.
If all you need is debt advice, this won’t affect your credit score. If our debt advisors recommend signing up for a debt solution, you can get started straight away with our online debt advice tool – any time, day or night. Free and easy-to-use, our tool will tell you which debt solutions are available to you on-screen, instantly.
*Our advice is free, but if you sign up for a debt solution, a fee will apply for some solutions.
Motor Finance Compensation: FAQs
The FCA advises:
- You should check your contract as there may be a cancellation fee
- Any fee should be fair and reflect the work already done
- If you’re not happy, you can complain to the firm
- If possible, take your complaint to the legal ombudsman
Yes, you can make a motor finance compensation claim directly with your lender, without a claims management company or law firm. Soon, a free FCA scheme could make it even simpler.
The easiest way to tell is by checking old bank statements, as your lender should be listed there. You should be able to access these in your mobile banking app (depending on your bank) or by contacting your bank directly. Other things you can try include:
- Checking through old paperwork: See if you can find a copy of the agreement in any old paperwork you may have kept.
- Checking your credit file: You can find out how to check your credit file for free on the Money Saving Expert website.
If the FCA’s proposed motor finance compensation scheme goes ahead in 2026, there will be official rules lenders must follow. This will include deciding who is owed compensation and how much. They will take legal action if lenders do not follow these rules.
