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Explainer

The motor finance scandal: what happened, and what it means for you

For over a decade, millions of UK drivers were sold car finance on terms they were never properly told about. The FCA has confirmed a mandatory redress scheme, which is now partly suspended while the Upper Tribunal hears legal challenges. Here is what went wrong, what the Supreme Court decided, where the scheme stands, and what it means for you.

What were Discretionary Commission Arrangements?

A Discretionary Commission Arrangement (DCA) let a car dealer raise the interest rate on a customer's finance to earn a bigger commission from the lender. Between 2007 and January 2021, most UK motor finance was arranged through dealers who acted as credit brokers for lenders, and DCAs were common. The more the rate went up, the more the dealer was paid.

Customers were rarely told this commission existed, and almost never told the dealer had any say in the rate. The Financial Conduct Authority banned DCAs on 28 January 2021 after concluding the arrangement created a clear conflict of interest.

How widespread was this?

DCAs and other undisclosed commission arrangements were the industry standard for over a decade. The FCA estimates the scheme covers roughly 12.1 million in-scope agreements, with total redress in the order of £7.5 billion.

£7.5B

Total expected redress

12.1M

Agreements in scope

£829

Average payout

What did the courts find?

Court of Appeal: October 2024

The Court of Appeal ruled that dealers acted as fiduciary agents of their customers when arranging finance, and that undisclosed commissions were therefore secret commissions, recoverable in full. The decision was widely seen as an existential threat to the motor finance industry as it then existed.

Supreme Court: 1 August 2025

The Supreme Court (Johnson v FirstRand Bank Ltd, [2025] UKSC 33) rejected the broad fiduciary-agency analysis. It held that, as a general rule, dealers do not owe customers a disinterested duty when selecting a credit product. However, it confirmed that the unfair relationship test under section 140A of the Consumer Credit Act 1974 remains available, and that a very large undisclosed commission tied to an exclusivity arrangement (around 55% of the total charge for credit in Johnson) was sufficient to make the relationship unfair.

The FCA's confirmed redress scheme

Following the Supreme Court judgment, the FCA moved quickly. It consulted in October 2025 and published final rules (PS26/3) on 30 March 2026.

Two separate schemes

The FCA has structured redress as two schemes:

Scheme 1

Agreements from 6 April 2007 to 31 March 2014

Original deadline: 31 August 2026 (suspended)

Scheme 2

Agreements from 1 April 2014 to 1 November 2024

Original deadline: 30 June 2026 (suspended)

Who is eligible?

You will be considered for compensation if your agreement falls within those dates and at least one of the following applies:

  • A Discretionary Commission Arrangement (DCA) was in place and was not properly disclosed
  • The commission paid to the dealer amounted to at least 39% of the total cost of credit and 10% of the loan, and was not properly disclosed
  • There was a contractual tie giving the lender exclusivity or right of first refusal, not made apparent to you

How is compensation calculated?

Compensation reflects the commission element you would not have paid had the arrangement been properly disclosed, plus interest. The FCA has confirmed the average payout is £829 per agreement, up from approximately £700 at the consultation stage. The increase is because the final interest calculation is more generous than originally proposed.

The interest rate change

The FCA's final rules use 8% simple interest on the redress amount, rather than the lower benchmark rate proposed at consultation. This is the single biggest reason the average payout rose to £829.

Where does the scheme stand now?

The scheme is confirmed but partly suspended. Four parties challenged the FCA's rules in the Upper Tribunal in May 2026: Volkswagen Financial Services, Mercedes-Benz Financial Services, Crédit Agricole Auto Finance, and the consumer group Consumer Voice. On 2 July 2026 the Tribunal suspended parts of the scheme on terms agreed between the FCA and the challengers. Under the suspension, lenders do not have to calculate, communicate or pay compensation on the original timetable, but they must keep preparing, keep progressing complaints, tell complainants who are not entitled to compensation, and plan for the possibility of no scheme at all.

On 13 October 2026 the FCA confirmed the Upper Tribunal will hear the challenges between 16 and 26 February 2027. A judgment is expected in the months after the hearing. If the scheme is upheld and the judgment is not appealed, the FCA expects compensation payments to begin in 2027.

The Consumer Voice challenge argues the FCA's compensation method may leave some consumers with less than they are owed. If it succeeds, some payouts could rise. The lender challenges argue the FCA lacks the power to make the rules at all.

What the scheme means for you practically

If you have already complained

Your complaint sits in the priority queue. The FCA says lenders should contact complainants with agreements from April 2014 onwards (complaints made by 30 June 2026) by 18 November 2026, and complainants with earlier agreements (complaints made by 31 August 2026) by 18 January 2027, to confirm their position. No compensation will be calculated or paid until the legal process ends.

If you haven't complained yet

You can complain to your lender at any time. The FCA says lenders should respond to new complaints within five months. Lenders are also required, once the scheme is operating, to contact eligible customers who have not complained. Registering a complaint now means your case is on file ahead of any restart of the scheme timetable.

There are two ways to participate: wait to be contacted by your lender (free, no action required), or complain directly (also free). Both reach the same FCA scheme.

Key dates

  1. FCA bans Discretionary Commission Arrangements

  2. FCA launches formal review; complaint pause begins

  3. Court of Appeal rules in favour of consumers

  4. Supreme Court judgment ([2025] UKSC 33)

  5. FCA publishes redress scheme consultation (CP25/27)

  6. Consultation closes

  7. FCA confirms complaint pause will lift 31 May 2026

  8. FCA publishes final scheme rules (PS26/3)

  9. Legal challenges filed in the Upper Tribunal

  10. Complaint handling pause lifts

  11. FCA publishes further guidance for firms; contingency planning formally required

  12. Upper Tribunal suspends parts of the scheme on terms agreed with the FCA and the four challengers

  13. FCA confirms the Upper Tribunal will hear the challenges between 16 and 26 February 2027

  14. FCA expects lenders to have contacted existing complainants with agreements from April 2014 onwards (complaints made by 30 June 2026) to confirm their position

  15. FCA expects lenders to have contacted existing complainants with pre-April 2014 agreements (complaints made by 31 August 2026)

  16. Upper Tribunal hearing of the four legal challenges

  17. Tribunal judgment expected in the months after the hearing; any appeal would add further time

  18. Earliest expected compensation payments, if the scheme is upheld and the judgment is not appealed

FAQs about the scandal

Does the Supreme Court ruling mean my claim has been lost?
No. The Supreme Court narrowed the legal route by rejecting the broad fiduciary-agency analysis from the Court of Appeal, but it confirmed that the unfair relationship test under section 140A of the Consumer Credit Act 1974 remains available. The FCA's mandatory Consumer Redress Scheme captures the cases most likely to be unfair.
What is the high commission threshold?
Under the FCA's final rules (PS26/3), a commission is treated as 'high' for redress purposes where it amounted to at least 39% of the total cost of credit and at least 10% of the loan, and was not properly disclosed.
Will I definitely receive £829?
£829 is the average payout the FCA has confirmed across all in-scope agreements. Individual outcomes vary depending on the size of your agreement, the commission charged, and how long the finance ran. Some claimants will receive more, some less.
Is the scheme still going ahead?
The scheme is confirmed but parts of it are suspended by order of the Upper Tribunal while four legal challenges are heard. The hearing is listed for 16 to 26 February 2027. The FCA is defending the scheme and has told lenders to keep preparing for it, while also planning for the possibility that the Tribunal quashes some or all of it.
Is it better to complain now or wait for the scheme?
Both routes reach the same FCA redress scheme. A free eligibility check takes a few minutes and comes with no obligation to proceed. You can also wait to be contacted by your lender at no cost or disadvantage.
When were DCAs banned?
The FCA banned Discretionary Commission Arrangements on 28 January 2021. The redress scheme covers agreements taken out between 6 April 2007 and 1 November 2024.
Does this cover PCP and HP?
Yes. Both Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements are covered by the FCA's redress scheme.
Do I need to have kept my documents?
No. Lenders are required under the scheme to search their own records. You do not need to produce historic finance paperwork to complain.
What if my lender has been taken over?
Where your original lender has been acquired, merged, or rebranded, the successor firm typically inherits liability under the scheme.
Will making a claim affect my credit score?
No. Making a complaint or claim under the FCA redress scheme has no impact on your credit score.
Can I do this without a law firm?
Yes. You don't need to use a solicitor or claims management company to pursue a motor finance complaint. You can contact your lender directly free of charge. The FCA's scheme is designed to be accessible without legal representation.

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Official sources

The information on this site reflects the FCA's published guidance and regulatory position as at 16 October 2026.