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Motor Finance Redress Scheme 2026: Your Full Guide
The motor finance redress scheme is the Financial Conduct Authority's industry-wide programme for compensating car finance customers who were treated unfairly because commission arrangements were not properly disclosed to them. The final rules were confirmed in Policy Statement PS26/3 at the end of March 2026. Since then the scheme has been legally challenged, and in July 2026 the Upper Tribunal suspended parts of it while those challenges are heard.
This guide explains what the scheme covers, who it applies to, how redress is worked out, where the scheme stands following the suspension, and the options available to you if you had a PCP or HP agreement between 2007 and 2021.
IN THIS GUIDE
- What is the motor finance redress scheme?
- Why the FCA introduced a redress scheme
- Who the redress scheme applies to
- Which lenders are covered
- How redress is calculated
- Where the scheme stands now: the Upper Tribunal suspension
- Your options if you think you were affected
- Frequently asked questions
What Is the Motor Finance Redress Scheme?
The motor finance redress scheme is a regulatory framework that requires lenders to identify customers affected by undisclosed commission arrangements, assess each agreement, and pay redress where it is due. It applies to PCP and HP agreements arranged through a dealer or broker, and it was set out in full in FCA Policy Statement PS26/3.
A scheme of this scale is unusual. The FCA normally relies on individual complaints being handled by lenders and, where needed, the Financial Ombudsman Service. Its decision to require an industry-wide scheme reflects the number of agreements it believes were affected, and it places the work of identifying those agreements on lenders rather than on customers.
The scheme does not mean every customer receives a payment. Each agreement is assessed individually, and the outcome depends on the commission arrangement in place, what was disclosed, and the terms of the agreement itself.
For a plain-English introduction to how claims work, see What Is a PCP Claim and Who Can Make One?
Why the FCA Introduced a Redress Scheme
The discretionary commission problem
For much of the period from 2007 to 2021, many car dealers acting as credit brokers could earn a larger commission by setting a higher interest rate on a customer's finance agreement. These discretionary commission arrangements (DCAs) were rarely explained to customers, which created a conflict of interest built into how motor finance was sold.
The FCA began reviewing the motor finance market in 2017 and published its final findings in 2019, concluding that DCAs were causing harm to consumers. It banned DCAs from 28 January 2021. Our complete guide to discretionary commission arrangements explains how they worked, and our article on the three types of hidden commission in car finance covers the other commission structures the scheme addresses.
The court cases
In October 2024, the Court of Appeal's judgment in Johnson v FirstRand Bank found that brokers and lenders owed customers wider duties of disclosure around commission. The Supreme Court heard the appeal and, in August 2025, narrowed much of that ruling, while still finding that the relationship in Mr Johnson's case was unfair under section 140A of the Consumer Credit Act 1974.
The FCA's scheme rests on its own regulatory powers rather than on the outcome of any single case. For the full sequence of events, see our FCA car finance investigation timeline.
Who the Redress Scheme Applies To
According to PS26/3, you may fall within the scope of the scheme if:
- you financed a car, van, motorbike or other motor vehicle on a PCP or HP agreement (leases and personal contract hire are not included)
- the finance was arranged through a dealer or broker
- a commission arrangement between the dealer and the lender was not properly disclosed to you
- for DCA agreements, the finance was taken out between 2007 and 2021, before DCAs were banned
PS26/3 also sets out exclusions. These include agreements where the commission fell below a minimum threshold, agreements where the lender can show no loss occurred, and agreements that have already been settled in full, decided by the Financial Ombudsman Service, or decided by a court.
Each agreement is assessed separately. If you had more than one PCP or HP agreement during this period, each one may be considered in its own right.
The FCA split the scheme into two parts: one for agreements taken out before 1 April 2014, when it took over regulation of consumer credit, and one for agreements from that date onwards. Some lenders have argued the FCA's powers to run a scheme do not extend to the earlier period, and the split is designed so that a challenge to one part does not hold up the other. Our PS26/3 final rules guide covers the two-scheme structure and the exclusions in detail.
To check the criteria against your own agreement, read Are You Eligible for a PCP Refund? or How to Check If You Have a Valid PCP Claim.
Which Lenders Are Covered by the Redress Scheme?
The scheme applies to lenders that used the commission arrangements it covers. Major lenders known to have used DCAs include:
- Barclays Partner Finance
- Black Horse, part of Lloyds Banking Group
- Close Brothers Motor Finance
- MotoNovo Finance
- Santander Consumer Finance
This list is not exhaustive. If you are unsure whether your lender is in scope, you can check the latest updates on the FCA website or ask us to review your agreement.
How Redress Is Calculated Under the Scheme
PS26/3 sets out two methods for working out redress. The first applies to the highest-commission DCA agreements, where the commission paid is refunded. The second, known as the hybrid remedy, applies to other eligible agreements and combines an estimate of the customer's financial loss with the commission paid. Interest is added to any redress due, at the Bank of England base rate plus 1% a year, with a minimum of 3% a year.
No amount is set in advance for any individual agreement. Whether redress is due, and how much, depends on your loan, the commission arrangement and how your lender applies the rules. Our article on how the hybrid remedy formula works explains the calculation step by step.
Where the Redress Scheme Stands Now: The Upper Tribunal Suspension
On 1 May 2026, the FCA confirmed that its scheme had been legally challenged and said it would defend it as lawful. Four parties have brought challenges: Consumer Voice (represented by Courmacs Legal), Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance.
On 2 July 2026, the Upper Tribunal made an order suspending parts of the scheme, on terms agreed between the FCA and the four challengers. According to the FCA's statement:
- lenders are not currently required to calculate or pay redress, or to send communications about compensation owed under the scheme, until the Upper Tribunal process concludes
- lenders must still comply with the rules that are not suspended, including identifying relevant complaints and agreements and gathering data on commission arrangements and disclosure, including information held by brokers
- lenders must still respond, by the relevant deadlines, to complainants who are not owed compensation under the scheme, with limited exceptions
The Upper Tribunal will hear the challenges on 14 to 18 December 2026 or 16 to 26 February 2027, depending on whether any party applies for further expert evidence or disclosure. The FCA expects judgment in the months after the hearing and has said that, if the scheme is upheld and not appealed further, compensation payments are expected to begin in 2027.
The implementation dates originally set in PS26/3 for calculating and paying redress have been overtaken by the suspension. We will update this guide as the Tribunal process develops.
Your Options If You Think You Were Affected
You do not need to use a claims management company to make a complaint. You can complain directly to your lender for free, and if your complaint is not resolved you can refer it to the Financial Ombudsman Service, also for free. Customers generally take one of three approaches.
Wait for your lender to contact you
Under the scheme, lenders are responsible for identifying affected customers. While parts of the scheme are suspended, lenders are not required to contact customers about compensation owed, so this route depends on the outcome of the Tribunal process. Waiting also means no one independently reviews the outcome before you respond.
Complain directly to your lender
You can raise a complaint about the commission on your agreement with your lender at any time. If you are unhappy with the response, or you do not receive a final response within eight weeks, you can take the complaint to the Financial Ombudsman Service.
Use a claims management company
A claims management company such as PCP Missold can check whether your agreement is eligible, gather the information needed, manage the complaint with your lender and review any offer with you before you decide whether to accept it. You do not need your original paperwork to raise a complaint. Lenders hold records of the agreements they provided, and these can be requested on your behalf. This can help if you had several agreements, no longer hold your paperwork, or your lender has changed ownership. Fees apply if you use a claims management company, and our terms of business set these out in full.
For a walkthrough of what each route involves, see A Simple Guide to the PCP Claim Process or our how it works page. For a wider overview of car finance claims, read The Complete Guide to Car Finance Claims in the UK.
IMPORTANT INFORMATION
This article is for general information only and does not constitute financial or legal advice. The motor finance redress scheme is subject to ongoing legal proceedings and the position may change. The information in this article was accurate as at 23 September 2026.
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