If you bought a car on installments in the UK in the last 18 years, you may owe money. The Financial Conduct Authority (FCA) announced a compensation scheme on Monday that will see millions of drivers receive compensation for car finance deals where they paid more than they should have. The scheme covers contracts concluded between April 2007 and November 2024.
The FCA has announced a £9.1bn compensation scheme. 12.1 million contracts are eligible.
What is it about?
The scandal stems from how car dealers and leasing companies were making money off the backs of customers. Many dealers received commissions from financing firms based on the interest rate they set for the customer. The higher the interest, the more the dealer earned. These arrangements, called discretionary commission arrangements (DCA), were not disclosed to buyers. Basically, the dealer had a vested interest in charging you as high an interest rate as possible without telling you. The FCA banned these practices in 2021, but the damage has already been done.
How much money is at stake?
The total cost of the scheme is estimated at £9.1 billion. Of this amount, 7.5 billion will go directly to consumers, and the remaining 1.6 billion covers administrative costs. 12.1 million contracts are eligible. Compensation varies from case to case, depending on how much the interest was inflated, but the average is £829. In addition to the principal amount, compensatory interest is added, calculated at the Bank of England rate plus 1%, with a minimum of 3% per annum.
Who is eligible?
You are eligible if you bought a car, motorbike or van on installments (PCP or Hire Purchase) between 6 April 2007 and 1 November 2024 and the contract involved at least one of these three situations: undeclared discretionary charge (DCA), excessive charge (at least 39% of the total cost of the loan and 10% of the loan), or an exclusivity clause between the dealer and the financier. Personal Contract Hire (PCH) contracts are not covered by the scheme.
How to claim your money back — step by step, free
You don’t need a lawyer or brokerage firm. Everything is done for free. Here are the steps:
Step 1: Find out who will give the loan
The claim is submitted to the financing company that gave you the loan, not to the dealer where you bought the car. If you no longer know who will finance you, you have several options. Look in the original financing agreement, if you still have it. Check your bank statements, look for the automatic monthly payment (direct debit) that was going to the leasing company. Check your credit report, if the contract has been active in the last six years, it appears there. You can get a free credit report through Equifax, Experian or TransUnion. Equifax has even released a free auto finance contract checker on their website.
Step 2: File your complaint
Go to the FCA website at fca.org.uk/consumers/car-finance-complaints/list-lenders. There you find a list of all the leasing companies, their contact details and, most importantly, a sample letter or email that you fill in with your details and send directly to the company. It’s a simple form where you have to put your name, address, finance contract number (if you have one) and say you’re claiming unclaimed fees. Send the email or letter and keep a copy.
Step 3: Wait for the response
After you file the complaint, the company will review your contract. Within three months of starting the scheme (30 June 2026 for contracts after April 2014, 31 August 2026 for older contracts), you will receive a reply from the firm telling you if you are owed money and how much. If you agree to the amount, you accept it and the company has one month to pay you. If you’re not satisfied, you have a month to appeal and can take your case to the Financial Ombudsman Service for free, which checks whether the firm has complied with the scheme’s rules.
What happens if you don’t file a claim?
Even if you do nothing, companies have an obligation to contact you if you are eligible. Deadline: end of December 2026 for contracts concluded after April 2014, end of February 2027 for older ones. You will be notified and have six months to respond if you want to join the scheme. If no one contacts you, you can file the claim yourself until August 31, 2027.
Beware of brokerage firms and scammers
In the following period, you will receive messages, emails, maybe even phone calls from companies promising to recover your money. In return, they take a percentage of your compensation, sometimes over 30%. There is no need. You can do it all yourself for free. The FCA has created the scheme for exactly that. And beware of scammers: the FCA warns that there have already been reports of fraudsters posing as leasing companies and offering false compensation. Never give out your PIN, online banking password or card details. If you receive a suspicious message, check the company details on the FCA website or call the FCA car finance scam helpline.
Useful links
FCA page with information about the scheme and how to make a complaint: fca.org.uk/consumers/car-finance-complaints
List of leasing companies with contact details and sample letter: fca.org.uk/consumers/car-finance-complaints/list-lenders
Financial Ombudsman Service (free if you are not satisfied with the answer): financial-ombudsman.org.uk
Free Equifax Car Finance Checker: https://www.equifax.co.uk/products/product-features/car-finance-checker
Free MoneySavingExpert Guide: https://www.moneysavingexpert.com/reclaim/reclaim-car-finance/
The leasing industry, through the FLA association, said the scheme was too big. Consumer organization Consumer Voice says it doesn’t go far enough.
But regardless of the debate, if you had a UK car finance deal after 2007, check it out.
It’s free, takes a few minutes, and you might have some money to spare.
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