**Millions of UK Drivers May be Eligible for Motor Finance Compensation Worth up to £950 Each**
Millions of motorists across the UK could be in line for substantial compensation, potentially receiving up to £950 each, following a landmark announcement by the Financial Conduct Authority (FCA). The regulator is considering an industry-wide compensation package after finding widespread failures within the motor finance sector, particularly around the transparency of commissions paid to car dealers.
The FCA recently revealed that many motor finance providers had not properly disclosed essential details about commission arrangements to consumers who purchased vehicles on finance. In response, the FCA will open a consultation on how to implement a redress scheme, which could affect anyone who entered into a car finance agreement between 2007 and 2021. Although most individuals are expected to claim less than £950, the total amount paid out could reach an astronomical £18 billion.
Consumer finance expert Martin Lewis, who routinely offers impartial financial guidance, stated that as many as 40% of people who entered into car finance deals in that 14-year window could stand to receive some form of compensation. In a video statement shared on X (formerly Twitter), Lewis emphasised the far-reaching consequences of the FCA’s move, highlighting that this could mean “millions of ordinary drivers are owed hundreds of pounds each”.
The FCA’s planned consultation is due to open no later than early October. Should the scheme proceed as expected, the initial round of payments would likely commence in 2026. This follows a crucial Supreme Court judgment in which the regulator had intervened, ruling that while some commission payments were legal, customers who had not been sufficiently informed about these arrangements may have experienced unfair treatment.
Under FCA guidelines, people who have previously lodged complaints are not required to take any additional action. However, those who suspect they were affected—particularly if they feel they paid too much due to a lack of commission disclosure—are advised to begin the complaints process now. Directly contacting one’s lender or broker is the recommended first step, as using a claims management company or solicitor could see a significant portion of any potential payout—often around 30%—lost to fees.
After submitting a complaint, lenders are obligated to acknowledge receipt within eight weeks. However, in light of the industry-wide compensation consultation, final responses may be delayed until at least December 2025. For those dissatisfied with their provider’s handling of the issue, escalation to the Financial Ombudsman Service remains an option.
Looking ahead, the FCA intends to establish clear regulations outlining how firms should fairly and efficiently assess claims of compensation, and to ensure compliance across the market. Firms found flouting these guidelines could face enforcement action, as the authority seeks to restore faith in a market upon which millions rely for access to vehicles.
Nikhil Rathi, the FCA’s chief executive, commented on the situation: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”
Rathi also underlined that the FCA’s aim is to make the compensation process as straightforward as possible, discouraging the use of third-party claims handlers that would reduce the compensation sum ultimately received by individuals. “If you do, it will cost you a significant chunk of any money you get,” he stated.
While the process may take time to implement, the FCA expects to roll out compensation payments from next year, providing much-needed financial relief to affected motorists and reaffirming its commitment to consumer protection in the finance sector. As the situation develops, motorists are encouraged to stay informed and seek independent advice before taking any steps to claim compensation.