British drivers receive huge update on future of car finance scandal compensation scheme

It said that the timeframe will allow the regulator to finalise and begin implementing any compensation scheme, while allowing companies to have a say in how it will work.

Car finance complaints were first paused in January 2024 to prevent inconsistent outcomes for consumers and shocks for businesses and the market.

Compensation could be owed to motorists if they were not informed of commissions between motor finance lenders and brokers.

The FCA stated that it was able to make a decision following legal clarity from the Supreme Court and High Court, which have both delivered verdicts this year.

It added that a compensation scheme would likely go ahead, with complaints being dealt with under specific rules, including timeframes.

A consultation has been launched to gather opinions on the future of the compensation scheme and the best ways that it can operate.

The deadline to lift the pause on the handling of certain motor finance complaints will now end on May 31, 2026, rather than July 31, 2026.

The financial regulator has also reminded firms that they should be progressing complaints relating to the car finance scandal.

It aims to publish final scheme rules in February or March 2026, when the FCA will need to consider how the rules "interact with the end of the complaint handling pause".

The FCA also provided advice to consumers waiting for an update, saying: "People who have already complained don't need to do anything.

"However, consumers worried that they were not told about commission and who think they may have paid too much for their motor finance, should complain now."

Leasing complaints are excluded from the further extension since they are not in the proposed compensation scheme.

Firms must start sending final responses to any motor leasing complaint from Friday, December 5, 2025. This is in line with normal complaint-handling rules.

Commenting on the latest update, Rhydian Jones, motoring expert at Confused.com, noted that it was a long-awaited decision for many motorists who had been waiting for clarity.

However, he warned that compensation schemes on this scale often attract criminals looking to take advantage of the situation, as well as vulnerable motorists.

He said: "Our research shows that more than half of UK adults (52 per cent) say they have been targeted by scams, and fraudsters know this is a hot topic.

"While the FCA has already acted to remove misleading adverts, it's still important that drivers stay alert and only follow official guidance. Beware of convincing phone calls, emails or texts to steal personal or financial details.

"Never share sensitive information such as bank details, National Insurance numbers or driving licence numbers with anyone who contacts you unexpectedly. If in doubt, report the message or call to Action Fraud, or check the FCA's online register to confirm if a company is legitimate."