The FCA’s unfair motor loans compensation scheme is a proposed £14 million initiative to refund drivers who were overcharged for car finance because brokers or dealers received hidden commissions from lenders. Between 2007 and 2024, some brokers were allowed to increase customers’ interest rates to earn higher commissions, a practice the FCA has deemed unfair. The scheme will ensure affected customers can claim compensation directly from their lenders without needing to go to court or use claims firms.
How to claim under the FCA unfair motor loans compensation scheme
If you think you were charged more for your car finance because a broker received a hidden commission, you may be entitled to compensation. Start by checking whether your loan fits the scheme’s eligibility rules, then file a complaint with your lender using the FCA’s guidance. When the scheme opens, respond promptly to any communications and keep detailed records. Doing so could ensure you receive the refund you’re owed for unfairly arranged motor finance.
- Check eligibility: Make sure your car finance agreement was taken out between 6 April 2007 and 1 November 2024 and involved a broker who earned an undisclosed commission.
- Gather paperwork: Find your loan agreement, dealer details, and any correspondence about interest rates or commissions.
- Complain to your lender: Use our car finance claim letter generator based on the FCA’s template letter to submit a formal complaint stating you were not told about the broker’s commission.
- Wait for the scheme to launch: Lenders will contact eligible customers, respond promptly and opt in within the stated time frame.
- Receive your outcome: If your claim is accepted, you’ll get compensation (estimated average £700). If rejected, you can escalate to the Financial Ombudsman Service.
What is the motor finance scandal?
If you bought a car on finance in the last few years, you may be entitled to compensation under the FCA’s proposed £14 million unfair motor loans scheme, which aims to refund customers who were not told about commission arrangements between car dealers and lenders. The scheme follows the FCA’s findings that some brokers inflated interest rates to earn higher commissions without properly disclosing these deals to customers.
To find out if you’re eligible, start by checking the key criteria. Your motor finance agreement must have been taken out between 6 April 2007 and 1 November 2024, and must have involved a broker or car dealer who earned a commission from the lender. The issue arises if you were not told about one of three specific arrangements: a discretionary commission (where brokers could raise your interest rate to boost their commission), a high-commission deal (where commission was unusually large), or a restricted agreement between the broker and lender that limited your choice. If you were properly informed about the commission, you may not qualify, but lenders will have to prove that disclosure was adequate.
The first practical step is to complain to your lender. Even before the compensation scheme officially launches, the FCA recommends that customers who think they were affected submit a formal complaint. You can use the FCA’s template letter to help structure your claim. Include your name, contact details, the finance agreement number, the date you took out the loan, and the name of the dealer or broker if you have it. Clearly state that you believe the commission was not properly disclosed and ask to be considered for compensation under the FCA scheme. Always send your complaint using a method that provides proof of delivery and keep a copy for your records.
Once the scheme officially begins, lenders will start contacting customers who may be eligible. If you’ve already complained, you may hear from your lender sooner. When contacted, you’ll need to confirm that you want to take part in the scheme, usually within one month if you’ve complained already, or within six months if you haven’t. If your lender cannot reach you, you’ll have up to one year from the start of the scheme to make your own claim. The FCA plans to run a national advertising campaign to make people aware of their rights and deadlines.
When you opt in, your lender will review your agreement to see if you qualify for compensation. In many cases, if evidence is missing or unclear, the lender must assume that you were not properly informed about the commission. If your claim is accepted, you’ll receive a payout, on average, around £700 per agreement, according to the FCA. If your claim is rejected, you have the right to appeal to the Financial Ombudsman Service (FOS), which can check whether the lender followed the scheme’s rules correctly. If you still disagree with the outcome, you may be able to take your case to court, though that could involve more time and expense.
Avoid claims management companies.
The FCA also warns consumers to be cautious about using claims management companies or law firms that charge for helping you claim. The process is designed to be straightforward, so you can claim directly without paying fees that could reduce your compensation. It’s also important to keep all relevant paperwork, loan agreements, correspondence with the dealer or lender, and any commission-related information, as this will make your claim easier to verify.
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