Car finance refunds explained: what the FCA review means for you

Key takeaways

• The Financial Conduct Authority (FCA) is reviewing whether drivers were overcharged on car finance deals between 2007 and 2024.

• A new refund scheme could launch in 2026, with potential payouts worth hundreds or even thousands of pounds.

• Keep your car finance documents and avoid claims management companies that charge fees.

What’s happening?

You may have seen headlines about car finance refunds recently, because the FCA is proposing a compensation scheme for drivers who may have been overcharged on car finance deals. The potential payouts could be big.

Here’s what’s happening, who might get money back, and how to stay safe while you wait.

Between April 2007 and November 2024, some car dealers and lenders used “discretionary commission arrangements” (DCAs) when selling car finance. They allowed dealers to set interest rates, often allowing them to earn higher commissions. The FCA found this practice could lead to unfair overcharging and banned DCAs in January 2021. Now it’s reviewing whether affected customers should receive refunds.

Who could be owed a refund?

You may be eligible if you:

• Took out car finance between 6 April 2007 and 1 November 2024

• Used a Personal Contract Purchase or Hire Purchase agreement

• Arranged it through a dealer or broker, not directly with the lender

• Paid a higher interest rate because of a discretionary commission

Even if your finance agreement has ended, you could still be in store for a refund.

How much could you get back?

Refunds haven’t been finalised yet, but early estimates suggest payouts could reach hundreds or even thousands of pounds. The exact amount will depend on:

• The size and term of your loan

• The commission structure used

• The FCA’s final refund formula

The FCA is expected to confirm details in early 2026, including when payments might start.

What should you do now?

✔ You can complain now, but expect delays - The FCA has paused firms’ deadlines for handling certain car finance complaints while it finalises the redress scheme. If you choose to submit a complaint now, you may need to wait longer for a response.

✔ Keep your paperwork safe - Hold on to your car finance agreement, loan details, and any related emails or statements, as you may need them later.

✔ Avoid using claims firms - Many charge up to 30% of any refund, but the official process will be free to use once launched.

Alan Cairns
Senior Content Editor

Expert says

It’s understandable that many drivers are eager to find out if they’ll be due a refund, but stay patient and avoid paying unnecessary fees to claims firms. Once the official FCA scheme is in place, applying for compensation will be free and straightforward.

Watch out for scams

Fraudsters are already targeting drivers with fake “car finance refund” calls and emails. Legitimate lenders won’t ask for upfront fees or bank details. If you’re contacted unexpectedly, don’t share personal information, and report scams to Action Fraud.