If you financed a car between 2007 and 2020, you could be in line for compensation worth nearly £1,000.

And thanks to a new ruling, motor finance companies can’t escape paying you back by claiming they’ve “lost” your paperwork.

Millions of UK drivers were secretly overcharged through car finance mis-selling, where brokers inflated interest rates to earn higher commissions – all without telling customers. Now, the Financial Conduct Authority (FCA) is forcing firms to return the money they took, yes that means motor finance compensation, even if they claim their records have been deleted or destroyed.

The FCA redress scheme could become one of the UK’s biggest consumer payouts since the PPI scandal, with a total redress scheme worth between £9 billion and £18 billion because of car finance miss-selling.

This can be described as PPI-style car finance refunds but this time around we’re going to make sure what people don’t fall victim to those companies that claim they can do all of the work for you, when in actuality, you can easily and simply do it yourself. 

Here’s what’s changing, why it matters, and what you need to do now to protect your payout.

Why This Matters to You

Millions of UK drivers were secretly overcharged for car finance through dodgy commission arrangements. Now the Financial Conduct Authority (FCA) is forcing companies to pay back what they owe – even if they claim your records have vanished.

This isn’t just another regulatory announcement. It’s potentially money in your pocket from one of the biggest mis-selling scandals since PPI.

What’s Happened: The Supreme Court Ruling Changes Everything

On 1st August 2025, the Supreme Court delivered a landmark ruling that has rocked the motor finance industry. The decision confirmed that brokers who secretly inflated your interest rates without telling you broke the law.

Here’s what was happening:

Discretionary Commission Arrangements (DCAs) allowed car finance brokers to bump up your interest rate. The higher the rate, the bigger their commission. You paid more, they earned more – and you had no idea.

The FCA banned this practice in January 2021, but the damage was already done. Around 14.6 million contracts were affected between 2007 and 2020.

Following the Supreme Court ruling, the FCA confirmed it will launch a comprehensive redress scheme covering 30 million historic motor finance agreements. The total bill? Between £9 billion and £18 billion.

The Missing Data Problem Finance Firms Are Trying to Use

Now here’s where it gets tricky – and where the FCA has taken a firm stand.

Motor finance companies are claiming they can’t properly compensate customers because:

• Records have been deleted: Many firms destroyed old customer data to comply with GDPR requirements
• Systems are complex: Information is scattered across multiple platforms, lenders, and brokers
• Time has passed: We’re talking about agreements going back 18 years – far beyond normal data retention periods

The FCA’s Response: No Excuses Accepted

FCA Chief Executive Nikhil Rathi has delivered a blunt message: “Instead of telling us what all the problems are, work with us on the solutions.”

The regulator expects firms to use every available method to recover missing data:

• Working with credit reference agencies to rebuild customer information
• Cross-referencing commission payments with loan account histories
• Using artificial intelligence to consolidate scattered records
• Employing data modelling to estimate missing details

Stephen Haddrill from the Finance and Leasing Association warned that evidence from 2007 would be “patchy at best.” But the FCA’s position is clear: missing data isn’t a get-out clause for avoiding compensation.

What This Means for Your Motor Finance Compensation

The numbers are promising for affected consumers:

Average Payout: Around £950 per affected agreement
Total Scheme Value: £9-18 billion
Affected Contracts: Approximately 14.6 million agreements

But don’t expect immediate payments. The timeline looks like this:

• October 2025: FCA publishes detailed consultation (six weeks for responses)
• 2026: Final rules established and payments begin
• Now: You can already complain directly to your finance provider

Your Action Plan: What to Do Right Now

Step 1: Gather Your Paperwork

Look for car finance agreements from 2007-2020, including:

• Personal Contract Purchase (PCP) deals
• Hire Purchase (HP) agreements
• Any paperwork mentioning commission arrangements

Step 2: Wait for the October Consultation

While you can complain now, the October 2025 consultation will provide full details on how compensation will be calculated. This might help you make a stronger case.

Step 3: Complain Directly to Your Finance Provider

Skip the middlemen. Contact your original finance company directly if you believe you were affected by undisclosed commissions.

Step 4: Keep Records Safe

Hold onto all documentation. You’ll need evidence of your agreements to support any compensation claim.

Scam Alert: Protect Your Payout from Costly Middlemen

The FCA has launched a £1 million awareness campaign warning about two major threats to your compensation:

Claims Management Companies (CMCs)

These firms are already advertising their services, promising to handle your claim for you. The catch? They’ll take around 30% of any payout you receive.

The truth: You don’t need them. You can complain directly to your finance provider for free.

Fraudsters and Scammers

Criminals are already exploiting the situation by:

• Posing as car finance lenders
• Falsely claiming people are owed immediate compensation
• Trying to steal personal details or demand upfront fees

Remember: Legitimate compensation won’t start until 2026, and you’ll never need to pay anyone to access it.

Political Pressure and Industry Pushback

The scheme isn’t without controversy. The House of Lords Financial Services Regulation Committee, led by Lord Forsyth, has questioned whether the 2007 start date is legally justified.

They’ve suggested aligning with the six-year limitation period under the Consumer Credit Act instead. This would significantly reduce the scheme’s scope and cost.

However, the FCA maintains that the 2007 cutoff ensures consistency with how the Financial Ombudsman Service handles complaints.

The Bottom Line: Stay Alert and Informed

This FCA announcement represents a significant victory for consumer rights. By refusing to let firms use missing data as an escape route, the regulator is putting the burden of proof where it belongs – with the companies who profited from these arrangements.

The message to motor finance firms is crystal clear: administrative challenges and patchy records won’t be accepted as excuses to deny legitimate compensation.

For consumers, the key is staying informed while avoiding costly mistakes:

• Don’t rush into using claims management companies
• Ignore cold calls about immediate payouts
• Keep your old finance documents safe
• Wait for the October consultation for full details
• Complain directly to your finance provider when ready

With potential average payouts of nearly £1,000 per affected agreement, this could be one of the UK’s most significant consumer compensation schemes ever. The FCA’s tough stance on data recovery shows they’re serious about making it work for you, not the firms trying to avoid paying what they owe.

Stay tuned for updates as the October consultation approaches, and remember – when compensation does arrive, every penny should be yours.

In the mean time, why not do these 8 checks on your own credit file to make sure your credit rating is in tip-top condition.