The Financial Conduct Authority (FCA) has proposed a compensation scheme requiring UK motor finance lenders to set aside between £8.2 billion and £9.7 billion to address unfair discretionary commission agreements (DCAs) linked to car loans signed between 2007 and 2024. The draft redress order, published on 7 October 2025, is now subject to a six-week consultation period, with consumer payouts expected to commence in 2026. According to the FCA, approximately 14.2 million loan agreements—representing 44% of all car finance contracts during this timeframe—are considered non-compliant, making it one of the most extensive regulatory interventions since the Payment Protection Insurance (PPI) scandal (Reuters).
The FCA determined that many providers had used commission models allowing brokers to adjust interest rates for higher personal reward, often at the expense of consumers. Affected customers are expected to receive an average of £700 each in compensation, with lenders having already allocated over £2 billion in anticipation of claims. FCA Chief Executive Nikhil Rathi stated: “Many motor finance lenders did not comply with the law or the rules … now we have legal clarity (after court rulings), it’s time their customers get fair compensation.”
- Between £8.2bn and £9.7bn in total compensation proposed by the FCA
- 44% of agreements from 2007–2024 considered affected
- Payouts of around £700 per eligible customer expected to begin in 2026
| Key Figures | Details |
|---|---|
| Total Compensation | £8.2–£9.7 billion |
| Affected Agreements | 14.2 million (44%) |
| Avg. Payout per Customer | £700 |
The FCA banned DCAs in 2021, but recent court rulings clarified consumer rights regarding past agreements. The proposal signals a major effort to ensure fair treatment and transparency for borrowers impacted by historical practices. Lenders and customers can expect clearer guidance and, for the sector, more predictable costs than initially feared.
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