Last reviewed: 30 May 2026
Anyone who took out car finance in the UK between 2007 and 2024 should pay attention this weekend. On Sunday 31 May 2026 the Financial Conduct Authority is lifting a 28-month pause on motor finance complaints, opening the door for drivers to claim compensation directly from their lender for the first time since January 2024.
What changes on Sunday
The FCA paused the handling of motor finance complaints in January 2024 to prevent inconsistent outcomes while it built an industry-wide redress framework. That pause ends at the start of business on 31 May 2026. From Monday 1 June, lenders must respond to complaints within statutory timeframes. Many complaints will be redirected into the £7.5 billion compensation scheme set out in the FCA's Policy Statement PS26/3.
Who is in scope
The scheme covers motor finance agreements arranged between 6 April 2007 and 31 January 2024. The FCA estimates around 14 million deals are potentially eligible. The core issue is the failure of dealers and brokers to disclose commission paid by lenders, which the Supreme Court accepted last year created an unfair relationship in some cases. Hire purchase, conditional sale and personal contract purchase (PCP) agreements are within scope. Leasing agreements are excluded.
How to complain - and what to avoid
Drivers can complain directly to the lender named on their finance agreement. The process is free. The FCA has stated explicitly that there is no need to use a claims management company (CMC) or law firm, and that those who do may lose over 30 per cent of any compensation in fees. The regulator has removed or amended more than 800 misleading CMC advertisements since January 2024 and intervened with five firms.
To file, drivers should locate their original finance agreement, identify the lender (this is not always the dealer), and write to the lender stating that they were not told about the commission paid to the broker or dealer. The lender is then required to respond.
The unresolved legal challenge
The compensation scheme itself is being legally challenged. The FCA confirmed the challenge on 1 May 2026 and issued further guidance to firms on 8 May 2026. The regulator has told lenders to prepare on a precautionary basis for a Tribunal decision in mid-November 2026, but the case is unlikely to be heard before October. The FCA has said it will defend the scheme robustly.
What it means for the car market
New car sales reached a 22-year high in February 2026 and a record £41 billion was lent on motor finance in 2025, up 6 per cent on 2024. The FCA expects limited impact on the new car finance market from the scheme. Drivers shopping for finance now are not affected by the pause lifting.
Frequently Asked Questions
Do I need to use a claims management company?
No. The FCA has stated complaints can be made directly to the lender free of charge and that claims management firms may take more than 30 per cent of any compensation.
Which agreements are covered?
Hire purchase, conditional sale and personal contract purchase agreements taken out between 6 April 2007 and 31 January 2024. Leasing agreements are excluded.
How much could a typical driver receive?
Compensation will vary by agreement. The FCA has indicated typical settlements may include interest at the Bank of England base rate plus one per cent from the date of overpayment.
When will payments start?
The FCA had expected most claims to be settled in 2026, with the vast majority by the end of 2027. The Tribunal challenge may delay that timetable.
Where can I check if my lender is in the scheme?
The lender named on the finance agreement is the firm to contact. The FCA Register lists authorised motor finance lenders.
How We Verified
All scheme details and dates were cross-checked against the FCA's Policy Statement PS26/3, the FCA statement on lifting the complaints pause (3 December 2025), and the FCA's 1 May and 8 May 2026 statements responding to the legal challenge. Figures on agreement volumes and lending totals were taken from the FCA's published market impact analysis.
