Car compensation: Martin Lewis gives update on FCA mis-sold car finance compensation claim scheme - news
Drivers could be in line for a major payday 💸
- The FCA has proposed a compensation scheme that could refund 14 million unfair car finance deals
- Average payouts are expected to be around £700 per loan, with some worth much more
- The scheme targets hidden commissions and misleading dealer practices between 2007–2024
- Martin Lewis says it could be the biggest payout scheme since PPI and urges drivers to act now
- The scheme is still under consultation, with final rules and payouts expected in early 2026
Millions of UK drivers could soon get a share of an £8.2 billion compensation pot, as part of a scheme that MoneySavingExpert.com founder Martin Lewis says could be “the biggest payout scheme since PPI.”
Lewis’ comments came as the Financial Conduct Authority (FCA) outlined its plans to pay compensation on up to 14 million unfair car loans.
If you bought a car on finance between April 2007 and November 2024, you could be owed around £700 per loan – and for some people, the payout could be much higher.
As Lewis summed it up: “This could be worth hundreds – possibly thousands – of pounds for millions of drivers. It’s not one to ignore.”
So what should you do now if you believe you are affected? Here’s the latest advice, straight from Lewis’ mouth:
What happened?
For years, car dealers and brokers quietly boosted their own commissions by increasing the interest rates customers were charged on finance deals – a practice known as a discretionary commission arrangement (DCA).
In short: the more you paid, the more they earned. Most people were never told this was happening, and the FCA says that broke the rules.
The watchdog has examined 32 million car finance agreements made between 2007 and 2024, and believes roughly 44% were unfair. That’s about 14 million loans.
Now, after months of legal wrangling, the FCA has proposed a nationwide compensation scheme that would refund drivers for the excess interest they paid, at an average of 17% of the total interest. That means if you paid £1,000 in interest, you could get £170 back.
Martin Lewis: ‘This is going to be huge – and simple’
Lewis has called the scheme “one of the simplest” compensation systems ever designed, saying: “This is important news for anyone who bought a car on Hire Purchase (HP) or Personal Contract Purchase (PCP) finance between 2007 and 2024.
“The regulator says 14 million were mis-sold and are due a typical payout of £700. It’s by far the easiest redress scheme we’ve ever seen – you may not have to do much at all to get your money.”
The scheme is still a consultation, which closes in November. Assuming it goes ahead as planned, payouts are expected to start in early 2026.
Three ways drivers were mis-sold
Lewis broke the issue down into three main types of mis-selling:
- Discretionary Commission Arrangements (DCAs): Dealers increased your interest rate to earn higher commission – the biggest and most common issue, affecting an estimated 11.4 million loans.
- Tied dealer panels: Some dealers claimed to “shop around” for the best deal but were actually tied to one lender, limiting your options. Around 3.2 million loans fall into this category.
- Unfairly high commissions: About 2.9 million loans where the dealer’s commission was excessive – over 35% of the total cost of credit and 10% of the loan amount.
Most people will fall into the first group. But a small number (around 13,000 to 14,000 people) who were charged exceptionally high commissions could get their full interest and commission repaid, potentially worth thousands.
What to do now
Lewis’ advice depends on whether you’ve already complained.
- If you’ve already complained - When the scheme launches (likely January or February 2026), your lender must contact you within three months to confirm you’re in the scheme. You won’t need to do anything, and your payout will be automatic. You can opt out if you’d rather pursue your own legal case, but once you do, you can’t opt back in.
- If you haven’t complained yet - Lewis recommends doing it now, before the scheme starts, and says: “If you complain before the scheme starts, you’ll automatically fall into the easier, ‘already complained’ group. That means you’ll be written to, and you won’t have to chase anything.”
You can complain directly to your lender or broker – and you don’t need a claims management company to do it. Lewis warns that using one could see you lose a cut of your compensation for no reason.
MoneySavingExpert has free template letters you can use to ask your lender whether you were affected by a discretionary commission arrangement. Templates for the other categories are being added soon.
Missing paperwork? Don’t panic
If your finance deal was many years ago, Lewis says it could be tricky if records no longer exist, but not impossible.
If you still have old bank statements, loan agreements, or credit reports showing who you paid, that could be enough to support your claim.
The FCA says it will also consider whether a lender was “systemically mis-selling” at the time, even if your individual documents are missing.
Don’t get caught out by claims firms
Lewis also warned that some people who’ve already signed up with claims firms could be charged fees despite not needing their help.
“If they’re not doing anything, they shouldn’t be charging you,” he said. “You can complain to the Claims Management Ombudsman if they try to take a cut of an automatic payout.”
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