FCA expects motor finance compensation scheme to start 2026

The Financial Conduct Authority (FCA) is preparing to launch a consultation on an industry-wide redress scheme addressing mis-sold motor finance agreements, with compensation potentially starting in 2026. The FCA estimates that around 30 million car finance deals were made between 2007 and 2020, of which approximately 14.6 million involved discretionary commission arrangements that likely breached disclosure laws, leading to unfair relationships and higher interest rates for consumers. FCA Chief Executive Nikhil Rathi highlighted that not all agreements will qualify for compensation and that the consultation will define the scheme's scope and set clear deadlines. The FCA expects compensation claims to be significant, with potential costs ranging from £9 billion to £18 billion. However, payouts could be delayed if some firms challenge the scheme legally or fail to cooperate fully, though many are already engaging proactively. The FCA is also considering opt-in and opt-out models for the scheme to balance consumer access and the burden on firms.