- Up to 12.1 million motor finance agreements eligible for compensation
- Average payout estimated at £830 per agreement
- Total redress could reach £7.5 billion if most consumers claim
Millions of UK drivers could soon receive compensation after the financial regulator approved a £7.5 billion redress scheme for motor finance mis-selling.
The plan, introduced by the Financial Conduct Authority, covers around 12.1 million agreements made between 2007 and 2024. It is aimed at resolving concerns that some consumers were not properly informed about how their loans were structured — in some cases leading them to pay more than necessary.
The scheme follows years of scrutiny into how dealers and brokers arranged finance, particularly where commission structures may have influenced interest rates.
Not every borrower will be eligible, but the scale of the scheme is still significant. The regulator estimates that around 75 per cent of eligible consumers could make a claim, potentially leading to total payouts of £7.5 billion.
On average, compensation is expected to be around £830 per agreement, though actual amounts will vary depending on individual cases.
Nikhil Rathi, chief executive of the Financial Conduct Authority, said the scheme aims to balance fairness for consumers with practicality for lenders, reportedly stated that it will return billions to households while allowing firms to move forward.
The compensation will generally be calculated based on the commission paid and the level of excess interest charged. In some cases, payouts will be capped to ensure borrowers are not left in a better position than if they had originally been treated fairly.
Deadlines, delays and what happens next
There will be a phased rollout, giving lenders time to prepare. For agreements taken after April 2014, firms have until June 30, 2026 to implement the scheme, while older loans have a deadline of August 31, 2026.
After that, lenders will have three months to inform customers whether they are owed compensation and how much. Those who have not yet complained may still be contacted directly if they are likely to be eligible.
Consumers who are not contacted will have until August 31, 2027 to come forward and make a claim.
The regulator has also warned against using claims management firms unnecessarily, noting that fees could eat into payouts.
For now, the scheme appears to offer a structured way to resolve a complex issue that has affected millions — though, as with any large-scale compensation plan, how smoothly it is delivered will likely be closely watched.
