Published: Thursday, November 6, 2025 · 4:38 PM | Updated: Thursday, November 6, 2025 · 4:38 PM
📊 267 views
The City regulator has released fresh details about its compensation scheme for motorists affected by the car financing scandal.
The Financial Conduct Authority (FCA) recently announced that those who were owed money could expect to receive an average of £700 per agreement.
The car financing scandal involved the mis-selling of financing agreements to customers. It is estimated that 44% of all agreements made since 2007 would be considered unfair, allowing those affected to claim compensation.
“Many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers,” the FCA said.
The regulator is still consulting on the scheme, and recently announced that it would be extending the consultation deadline until 12 December. It added that it still expected to publish final rules in either February or March.
The FCA also urged lenders to maintain the pace of responding to complaints so “we can draw a line under this issue and bring certainty to their customers, the market and investors”.
The long-running scandal has weighed heavily on the stocks and profits of the most exposed players.
This includes Lloyds, (LLOY.L), which announced in October that its third quarter profits had fallen 36%, due to provisions set aside to cover costs relating to the scandal.
The banking group’s total costs swelled 37% to reach £3.18bn for the quarter, including £875m of remediation costs, of which £800m related to the impact of the expected compensation arrangements.
Lloyds (LLOY.L) had previously said that it may need to set aside a “material” sum of extra money to cover the cost of the FCA’s scheme. After considering the regulator’s updated guidance in September, it didn’t consider the reserves of £1.2bn to be sufficient.
Meanwhile, Barclays (BARC.L) increased the amount it is setting aside to cover costs from £90m to £325m. Close Brothers (CBG.L) had already announced that it would set aside up to £165m for motor commission costs in the first half of its financial year.
Read more: Bank of England warns of AI-driven stock market bubble
The FCA has launched a £1m campaign to raise awareness about compensation. It had previously said that collective payouts relating to the scandal could reach £18bn. However, an average payout of £700 means that the collective total may be lower than previously thought.
The FCA’s campaign aimed to make people aware that they didn’t need to use a claims management company (CMC) or law firm to access the scheme.
Research commissioned by the regulator found that 79% of motor finance customers are aware that they may be entitled to compensation, and 61% are aware of a potential compensation scheme. However, 41% of those aware they may be eligible for a payout didn’t know they wouldn’t need to use a claims management company or law firm if a redress scheme is introduced.
The FCA said that using a CMC or law firm to make a motor finance claim could cost consumers around 30% of any compensation paid.
Read more: What you need to think about before taking a tax-free pension lump sum
Yahoo Finance UK previously asked readers whether they thought claimants would receive fair payouts. More than 70% said they didn’t expect justice to be served.
Here’s what you need to know about the scandal.
The FCA began investigating commissions in the motor finance industry in 2017.
The FCA then launched a consultation on the use of discretionary commission arrangements (DCAs) in 2019. DCAs were a type of commission model received by some car retailers and motor finance brokers, which was linked to the interest rate that customers pay.
This meant that the broker could effectively set the interest rate, and the FCA said this created an incentive to sell more expensive credit to some customers, acting against their interests.
As a result, the FCA banned DCAs in 2021, a move which it said would save customers £165m a year.
In January 2024, the FCA then launched a review of historical motor finance DCAs, to understand if there was any misconduct related to this type of commission before the 2021 ban. In addition, the review has also sought to understand if consumers have lost out and, if so, what the best way would be to ensure they receive appropriate compensation.
However, a Court of Appeal ruling in October of that year broadened the scope of the issue to any car finance commissions. The court found it illegal for dealerships to receive commissions on car finance deals without securing “fully informed consent” from buyers. It is feared that the landmark ruling has paved the way for a multibillion-pound redress scheme.
Read more: Britain’s soaring wealth gap entrenched by property ownership and pension
The Supreme Court granted Close Brothers (CBG.L) and South African financial services firm FirstRand (FSR.JO) permission to appeal the earlier ruling.
The Financial Times reported in January 2025 that the Treasury had submitted an application to intervene, saying in a letter that the case had “potential to cause considerable economic harm and could impact the availability and cost of motor finance for consumers”.
However, the Supreme Court said it had refused the Treasury’s application to intervene.
Then came the ruling in August 2025, which helped clarify some issues related to the scandal, but also raised more questions.
The FCA will propose rules on how lenders should fairly and efficiently decide whether someone is owed compensation and how much.
Upon agreement on the compensation scheme, the first payments are expected to be made in 2026.
The FCA urged consumers who were concerned that they had not been informed about commission and may have paid too much for their motor finance to complain immediately to their lender or broker.
Full details of the information consumers need to provide can be found on the FCA’s website. People who have previously complained don’t need to take any action.
Read more:
Download the Yahoo Finance app, available for Apple and Android.
MORE IN INSIDE CRYPTO
Bitcoin price steadies but fresh fears suggest slide to $52k
Published: Thursday, February 12, 2026 · 10:12 AM
This 1 Quantum Computing Rumor Is Making Investors Sell Their Bitcoin. Don’t Fall for It
Published: Thursday, February 12, 2026 · 9:20 AM
