The Financial Conduct Authority (FCA) has launched an investigation into motor finance agreements made between 6 April 2007 and 1 November 2024. The FCA estimates that £7.5 billion in total redress will be distributed across 12.1 million eligible agreements, with an FCA-estimated average of £829 per eligible agreement. This guide aims to provide clarity on the potential compensation the FCA-estimated scheme average is £829 per eligible agreement. ## What does the FCA scheme cover The FCA has estimated that the average compensation for those impacted by this investigation would be around £829 (FCA estimate). However, it's important to note that this is an average figure. The actual amount of compensation you may receive can vary significantly based on several factors such as the terms of your finance agreement and how much interest or fees were overcharged. ## How is compensation calculated? Compensation in motor finance investigations is typically determined by calculating the difference between what you paid under your agreement and what you would have paid at a fair market rate. This includes any excess interest, administration fees, and overpayment charges that may have been applied unfairly during your finance term. For instance, if you financed a car with an APR higher than the average market rate for similar loans, you could be entitled to compensation based on the difference in interest payments. Similarly, excessive early repayment or exit fees can also contribute to the total redress amount. ## What factors affect the amount? Several factors can influence how much compensation you might receive: -
Vehicle Price: The value of the vehicle you financed plays a significant role as higher-priced vehicles typically carry larger loan amounts and thus greater potential for overpayment. -
Finance Term: Longer finance terms often result in more cumulative interest paid, which could increase your eligibility for redress if rates were above market standards. -
Interest Rate Charged vs. Fair Rate: The disparity between the rate charged on your agreement and what was considered fair at that time is crucial. A significant gap would likely yield a higher compensation amount. -
How Long Ago the Agreement Was Made: Agreements made earlier in the period of investigation (2007 to 2014) may have been subject to more unfair practices, potentially resulting in larger redress amounts. ## FCA Total Redress Estimate The FCA has projected that a total of £7.5 billion will be distributed across 12.1 million eligible agreements (FCA, March 2026). ## Will I receive compensation automatically? The FCA has established a redress scheme to ensure fair treatment for affected customers. However, you are not guaranteed automatic compensation without taking any action. Lenders may proactively contact some customers who were overcharged and offer them redress directly. For those who haven't been contacted or believe they should be entitled to compensation but have not received it, the next step is to
complain directly to your lender. ##
How to complain directly to your lender for free Here's a step-by-step guide on how you can make a complaint without needing a
claims management company: 1.
Identify Your Agreement: Check if any of your motor finance agreements fall within the specified period (6 April 2007 to 1 November 2024). 2.
Gather Documentation: Collect all relevant documents such as loan agreements, statements, and any correspondence with your lender. 3.
Contact Your Lender: Reach out to your lender's customer service department or dedicated redress team via phone, email, or letter. Explain that you believe the FCA-estimated scheme average is £829 per eligible agreement. 4.
Provide Supporting Evidence: Submit copies of relevant documents and any additional information that supports your claim for overpayment or unfair treatment under your finance agreement. 5.
Follow Up: If you haven't received a response within 8 weeks, follow up with your lender. Ensure you keep records of all communications to support your case if needed. You do not need a claims management company to file a complaint; you can handle it directly and for free through your lender's customer service channels. ## Tax implications of compensation The tax status of motor finance redress payments is determined by HM Revenue and Customs (HMRC). Generally, compensation received under the FCA scheme is considered to be non-taxable income. However, if you have been overcharged due to an error or mis-selling and receive a refund, this could potentially affect your tax position depending on how the original payment was treated. To ensure clarity, it's advisable to consult HMRC’s guidance on the specific circumstances of your case or seek professional advice from a chartered accountant who can provide tailored assistance based on your financial situation. ## Timeline for receiving compensation Compensation payments under the FCA scheme are expected to begin once lenders have identified affected customers and processed their claims. This process could take several months as lenders review individual cases, calculate redress amounts, and communicate with customers. If you haven't been contacted by your lender within a reasonable timeframe, it's recommended that you initiate contact yourself. ## Sources and references - Financial Conduct Authority (FCA). "Motor Finance Agreement Redress Scheme" (2024) - HM Revenue and Customs (HMRC), Guidance on Taxable Income (2023) By understanding the process and taking proactive steps, you can ensure that you receive fair compensation for any overcharges or unfair practices in your motor finance agreement.
Key FCA Figures
The FCA confirmed on 30 March 2026: 12.1 million eligible agreements, £829 average compensation per agreement, £7.5 billion total redress at 75% consumer uptake, and £9.1 billion total cost to firms. The scheme covers agreements from 6 April 2007 to 1 November 2024. Two deadlines apply: 30 June 2026 for post-2014 agreements and 31 August 2026 for pre-2014. Final complaint deadline: 31 August 2027.
You can complain to your lender directly for free. You do not need a claims management company.
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MLJ.org.uk (mlj.org.uk) is a free, independent information service. We are not a claims management company, solicitor, law firm, or financial adviser. We do not handle complaints, process claims, charge fees, or accept any percentage of compensation. This information does not constitute legal or financial advice. You can complain to your lender directly for free. You do not need a claims management company. If your lender rejects your complaint, you can escalate to the Financial Ombudsman Service at no cost. For personalised legal or financial advice, consult a qualified professional.