TRW & Co · Financial services regulation
Motor Finance Commission Claims and the FCA Redress Scheme
Motor finance compensation is set by the FCA's redress scheme for car finance agreements from April 2007 to November 2024 where commission arrangements were not disclosed. The FCA estimates around £7.5 billion in redress across 12.1 million agreements. As of October 2026, parts of the scheme are suspended pending an Upper Tribunal challenge, but lenders and brokers must keep preparing.
Key pointThe Upper Tribunal suspension is partial: firms need not pay redress on the scheme timetable, but they must still gather commission data, obtain broker records and tell complainants who are not owed compensation.
At a glance
Supreme Court, August 2025
In Hopcraft, Johnson and Wrench the Court rejected bribery claims against lenders but upheld Mr Johnson's unfair relationship claim under section 140A of the Consumer Credit Act 1974.
Two schemes, one policy
PS26/3 created schemes for agreements from 6 April 2007 to 31 March 2014 and from 1 April 2014 to 1 November 2024.
Three unfair features
Compensation requires non-disclosure of a discretionary commission arrangement, high commission (at least 39% of cost of credit and 10% of loan) or a contractual tie.
Hybrid remedy and caps
Most cases receive the average of estimated loss and commission plus interest, with interest at base rate plus 1% and a 3% floor.
Tribunal hearing in 2027
Consumer Voice and three lenders challenged the scheme. The Upper Tribunal suspended parts of it in July 2026 pending a hearing now expected in February 2027.
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The short answer: where motor finance compensation stands
Motor finance compensation is now governed mainly by the FCA's Motor Finance Consumer Redress Scheme, finalised in Policy Statement PS26/3 on 30 March 2026. It covers car and other motor finance agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid the broker commission and certain arrangements were not disclosed. The FCA estimates around 12.1 million agreements are eligible and that firms will pay around £7.5 billion in redress.
As of October 2026, however, the scheme is partly on hold. It has been challenged in the Upper Tribunal by a consumer group and three lenders, and on 2 July 2026 the Tribunal suspended parts of it on terms agreed with the FCA. Firms do not currently have to calculate or pay redress on the scheme timetable, but they must keep preparing and must still tell complainants who are not owed anything.
For lenders and brokers, the practical message is to keep building data and complaint files now. For consumers, the FCA's position is that complaining directly to the lender is free and that the scheme, once unsuspended, will deliver compensation without the need for a claims company.
What the Supreme Court decided
The scheme follows the Supreme Court's judgment of 1 August 2025 in three linked appeals, Hopcraft, Johnson and Wrench ([2025] UKSC 33), against FirstRand Bank and Close Brothers. The case page sets out the issues: whether commission paid by lenders to car dealers acting as credit brokers could found claims in bribery, dishonest assistance or under the Consumer Credit Act 1974.
The Court of Appeal had found for the customers on broad grounds, holding that dealers owed duties that made undisclosed commission unlawful. The Supreme Court largely reversed that. It held that the dealers, who were selling cars for their own profit, did not owe customers the fiduciary or "disinterested" duty needed for the bribery and secret profit claims.
But one claim succeeded. In Mr Johnson's case, the Court found the relationship between lender and borrower was unfair under section 140A of the Consumer Credit Act 1974. The commission was very large relative to the cost of credit, a commercial tie between the dealer and lender was not disclosed, and he was given a document that suggested otherwise. He was awarded the commission plus interest.
The result was narrower liability than many had feared, but still a clear route to motor finance compensation where commission arrangements made the relationship unfair. Because section 140A depends on all the circumstances, it also meant that millions of individual complaints would turn on their facts. That is why the FCA chose an industry-wide scheme.
The FCA redress scheme: who is covered
The FCA made the scheme using its power under section 404 of the Financial Services and Markets Act 2000 to create consumer redress schemes. To reduce the risk that legal argument about pre-2014 agreements delays payment for later ones, it set up two schemes: one covering 6 April 2007 to 31 March 2014, and one covering 1 April 2014 to 1 November 2024.
According to the FCA's statement confirming the scheme, a consumer is considered for motor finance compensation only if they were not told about at least one of three arrangements between lender and broker:
- A discretionary commission arrangement (DCA), which let the broker adjust the interest rate to earn more commission.
- A high commission arrangement, meaning commission of at least 39% of the total cost of credit and 10% of the loan.
- A contractual tie giving a lender exclusivity or a right of first refusal, unless the lender can prove there were visible links with the manufacturer and dealer.
There are exclusions. Cases are treated as fair where commission was £120 or less (pre-April 2014) or £150 or less (from April 2014), where no interest was charged, where a DCA was not used to earn discretionary commission, or where the lender can show, in limited circumstances, that non-disclosure was fair or caused no loss. Consumers who have already had a court decision, a successful Ombudsman complaint or accepted redress are excluded, as are the highest-value loans.
How motor finance compensation is calculated
The scheme uses two remedies. The table summarises how the FCA described them in its final rules.
| Case type | Remedy | Key details |
|---|---|---|
| Cases closest to Johnson: undisclosed tie and/or DCA with very high commission (at least 50% of the total cost of credit and 22.5% of the loan) | All commission repaid, plus interest | The FCA estimates around 90,000 consumers fall into this group. |
| All other eligible cases | The "hybrid remedy": the average of estimated loss and commission paid, plus interest | Estimated loss is based on an APR adjustment of 17% for agreements from April 2014 and 21% for earlier agreements. |
| Capped cases | Hybrid remedy capped at the lowest of several measures | Caps include 90% of commission plus interest and adjusted cost of credit. The FCA expects around 1 in 3 hybrid cases to be capped. |
| Interest on all awards | Simple interest | Annual average Bank of England base rate plus 1%, with a floor of 3% for any year. |
The FCA estimates average redress of around £829 per agreement and total redress of around £7.5 billion, based on 75% of eligible consumers taking part. With non-redress costs, it puts the total cost to firms at around £9.1 billion. These are FCA estimates, not guaranteed amounts for any individual.
Limitation and timed-out cases
Claims are generally subject to a six-year limitation period, but that can be extended where relevant information was deliberately concealed. The FCA has said it does not expect lenders routinely to find cases out of time, given how poor disclosure was. Firms can exclude some high-commission-only cases that ended before 26 March 2020 if they can show clear and prominent disclosure that commission was payable, but they must explain this to the consumer, who can challenge it at the Financial Ombudsman Service.
The timeline and the Upper Tribunal challenge
As originally designed, the scheme had short implementation periods ending on 30 June 2026 (agreements from April 2014) and 31 August 2026 (earlier agreements). Lenders would then have three months to tell complainants whether they were owed compensation, and six months to contact non-complainants who might be owed money. Consumers would have six months to opt in, and those not contacted could complain to their firm until 31 August 2027.
On 1 May 2026 the FCA announced that the scheme had been legally challenged. The challengers are Consumer Voice, represented by Courmacs Legal, and three lenders: Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. The FCA has said it will defend the scheme robustly.
On 2 July 2026 the FCA confirmed that the Upper Tribunal had suspended parts of the scheme. Firms are not required to calculate or pay redress, or send communications about compensation owed, in line with the scheme timetable until the Tribunal process concludes. The Tribunal set aside hearing windows in December 2026 and February 2027; reports in October 2026 indicate the February 2027 window has been confirmed. A decision is therefore unlikely before spring 2027.
The suspension is partial. Firms must still identify relevant complaints and agreements, gather commission and disclosure data (including from brokers), tell complainants who are not owed compensation by the scheme deadlines (subject to limited exceptions), and cooperate with the Financial Ombudsman Service. Treating the suspension as a pause on all scheme work is a compliance risk.
What lenders and brokers must do now
The FCA has set up a dedicated supervisory team and requires senior managers to attest to responsibility for their firm's oversight and delivery of the scheme. Lenders and brokers should work through the following steps.
- Identify in-scope agreements. Map every motor finance agreement from 6 April 2007 to 1 November 2024 where commission was payable, split between the two scheme periods.
- Reconstruct commission and disclosure data. Establish for each agreement whether there was a DCA, high commission or a tie, how much commission was paid, and what the customer was told. Where data is missing, document the gap and the evidence used.
- Obtain broker information. Brokers must provide lenders with requested documents or information, or confirm they do not hold them, within one month of a request. Agree a process and keep records of requests and responses.
- Apply exclusions carefully. Record the evidence for any exclusion, such as minimal commission, visible manufacturer links or a timed-out case. The FCA has said it will check whether exclusions are applied appropriately.
- Respond to complainants who are not owed redress. This obligation is not suspended, subject to the limited exceptions in the FCA's statement.
- Prepare calculation and payment systems. Build and test redress calculations so payments can start promptly if the Tribunal upholds the scheme.
- Handle representatives and duplicates. Work with claims management companies and law firms to resolve cases where a customer has more than one representative.
- Govern and attest. Report progress to the board, align with Consumer Duty governance and prepare the senior manager attestation.
The scheme overlaps with the wider FCA Consumer Duty, which applies to how firms communicate with customers today, including about redress. Firms should also follow the government's work on Consumer Credit Act reform, which may change the legal framework for future agreements.
Routes to motor finance compensation for consumers and businesses
For individual borrowers, there are three main routes. The scheme is designed to be the main one, but it is not the only one.
- The FCA scheme. Complain to the lender, or wait to be contacted if you are potentially owed money. The FCA's car finance consumer pages explain the process. Using the scheme is free.
- The Financial Ombudsman Service. Consumers who disagree with how a firm applied the scheme rules can ask the Ombudsman to review it.
- Court claims. Consumers can still bring claims in court, including those whose cases fall outside the scheme, such as the highest-value loans. Court claims carry costs risk and take longer.
The FCA has warned about misleading claims management advertising and is studying the claims management market. A claims company or law firm may charge a significant share of any compensation for something the consumer could do free of charge. Businesses that bought vehicles on finance, such as sole traders, should check whether their agreements were regulated consumer credit agreements, which affects whether the scheme and section 140A apply.
Risks and common mistakes
Treating the suspension as a reason to stop work
The Upper Tribunal's order suspends specific scheme obligations, mainly calculating and paying redress on the scheme timetable. Many other rules remain in force, including identifying complaints, gathering data and telling complainants who are not owed redress. Firms that stop preparing risk falling behind if the scheme is upheld, and risk supervisory action now. The FCA has said it will supervise proportionately but expects firms to be ready to deliver the scheme promptly when the legal process ends.
Poor records of broker commission and disclosure
Lenders often lack complete records of what brokers told customers, particularly for older agreements. The scheme places the burden on lenders to establish the facts and justify any exclusion. Where records are incomplete, firms should document the steps taken to obtain information, the reasonable assumptions made and the consistency of their approach. Weak records can turn a case that might have been excluded into one that attracts redress, and can expose the firm to criticism from the Ombudsman.
Applying exclusions too aggressively
Exclusions such as the visible manufacturer links exception for ties, or the timed-out exception for older high-commission cases, require evidence. The FCA has said it will scrutinise how firms apply them, and consumers can ask the Ombudsman to review whether scheme rules were followed. Over-use of exclusions may also be inconsistent with the Consumer Duty. Firms should set clear criteria, apply them consistently, and keep an audit trail showing why each exclusion was justified.
Ignoring disputes between lenders and brokers
Lenders paying motor finance compensation may look to recover some of the cost from brokers, depending on the contractual terms and indemnities in their introducer agreements. Brokers, for their part, have direct obligations to cooperate with information requests. Firms should review their agreements now, preserve evidence and consider whether claims or notifications to insurers are needed. These disputes can be commercially sensitive where the broker relationship continues.
Cross-border and investor angle
Several lenders in the UK motor finance market are subsidiaries of overseas banks and vehicle manufacturers. Group boards, auditors and investors have been tracking provisions closely, and the uncertainty created by the challenge affects capital planning, funding and securitisation arrangements. Lenders that sold or securitised books should check where liability for historic redress sits under the transaction documents.
For our clients in Bangladesh and elsewhere who financed vehicles while living in the UK, the scheme does not depend on current residence. Lenders may contact them at their last known address, so keeping contact details up to date with the lender is sensible.
What to do next
As of October 2026, motor finance compensation is delayed rather than cancelled. Lenders, brokers and their investors should:
- Keep data collection and complaint processing on track for both scheme periods.
- Comply with all unsuspended rules, including responding to complainants not owed redress.
- Prepare calculation engines and customer communications for a prompt restart.
- Review broker agreements, indemnities and insurance cover.
- Brief boards on the Tribunal timetable and prepare the senior manager attestation.
- Monitor FCA statements for updates following the February 2027 hearing.
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. We advise lenders and brokers on scheme compliance, broker disputes and supervisory engagement through our consumer credit and financial services regulation teams, and act in related disputes through our banking and financial disputes and group litigation practices. Where advocacy in the higher courts or the Upper Tribunal is required, we instruct specialist counsel. To discuss your position, contact us at info@trw.co.
Frequently asked questions
01Am I entitled to motor finance compensation?
You may be if you took out motor finance between 6 April 2007 and 1 November 2024, the lender paid the broker commission, and you were not told about a discretionary commission arrangement, high commission or a contractual tie between lender and broker. Exceptions apply, for example where commission was very small, no interest was charged, or you have already received redress or a court decision. The FCA's scheme sets out the eligibility rules, and you can complain to your lender free of charge to have your agreement considered.
02How much motor finance compensation will I get?
The FCA estimates average redress of around £829 per agreement, but individual amounts vary widely. Cases closest to the Supreme Court's Johnson decision, involving very high undisclosed commission, receive all commission back plus interest. Most other eligible cases receive a hybrid remedy: the average of estimated loss and commission paid, plus simple interest at the Bank of England base rate plus 1%, with a 3% minimum. Around one in three hybrid cases will be capped so customers are not put in a better position than if they had been treated fairly.
03Why has the motor finance scheme been suspended?
The scheme was challenged in the Upper Tribunal by Consumer Voice, represented by Courmacs Legal, and by three lenders: Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance. On 2 July 2026 the Tribunal suspended parts of the scheme on terms agreed with the FCA. Firms do not have to calculate or pay redress on the scheme timetable until the Tribunal process ends, but they must keep preparing and still tell complainants who are not owed compensation. The FCA has said it will defend the scheme.
04When will the Upper Tribunal decide?
The Tribunal reserved two possible hearing windows: 14 to 18 December 2026 or 16 to 26 February 2027, depending on applications for further expert evidence or disclosure. Reports in October 2026 indicate the February 2027 window has been confirmed. A judgment will follow the hearing, so a decision is unlikely before spring 2027. The timetable for payments will then depend on the outcome and any further FCA directions.
05Do I need a claims company to get compensation?
No. Complaining to your lender is free, and the FCA designed the scheme so consumers can obtain compensation without paying a representative. Claims management companies and law firms may take a significant share of any award. The FCA has acted against misleading claims advertising and is studying the claims management market. Some consumers with complex or high-value cases outside the scheme may benefit from legal advice, but for most eligible customers the direct route is likely to be simplest.
06What should lenders and brokers do while the scheme is suspended?
They should continue all unsuspended work: identifying in-scope agreements and complaints, reconstructing commission and disclosure data, responding to broker information requests within one month, telling complainants who are not owed redress, and cooperating with the Financial Ombudsman Service. They should also build and test redress calculations, review broker agreements and indemnities, brief boards and prepare the senior manager attestation required by the scheme, so that payments can start promptly if the scheme is upheld.
Sources and official materials
- FCA confirms motor finance redress scheme — Scope, eligibility, calculation and costs of the final scheme
- PS26/3: Motor Finance Consumer Redress Scheme — The FCA's final policy statement and rules, March 2026
- Motor finance scheme partially suspended — FCA statement on the Upper Tribunal order, July 2026
- Supreme Court case page: Hopcraft, Johnson and Wrench — Issues, facts and judgment in the linked motor finance appeals
- Consumer Credit Act 1974, section 140A — Unfair relationships between creditors and debtors
- FCA: Car finance complaints — Consumer guidance on complaining and the scheme
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.