The regulator received more than 1,000 consultation responses and engaged extensively with consumer groups, firms, investors and industry bodies before finalising its approach, which it describes as fair for consumers and proportionate for lenders.

Approximately 12.1 million agreements are now eligible for compensation, down from 14.2 million at the consultation stage, following a tightening of eligibility criteria. Agreements involving minimal commission or zero APRs will not qualify, and where a lender can demonstrate visible links between a manufacturer and dealer, a contractual tie alone will not trigger a payout. The threshold for high commission cases has also been modestly raised.

To be considered for compensation, a consumer must not have been told details of at least one of three arrangements between the lender and broker: a discretionary commission arrangement (DCA), which allowed brokers to adjust interest rates in exchange for higher commission; a high commission arrangement amounting to at least 39% of the total cost of credit and 10% of the loan; or a contractual tie granting the lender exclusivity or a right of first refusal. Certain exceptions apply, for instance, where commission was below £120 (or £150 from April 2014), where no interest was charged, or where the DCA was not used to earn discretionary commission.

The scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024. Given legal complexity around the earlier period, the FCA will implement two separate schemes, one covering April 2007 to March 2014, and another from April 2014 onwards, so that any legal challenge to the earlier period does not delay compensation for those with more recent agreements.

Around 90,000 consumers whose cases most closely resemble the landmark Johnson case considered by the Supreme Court will receive full repayment of commission plus interest. All other eligible consumers will receive what the FCA describes as a hybrid remedy: the average of their estimated loss and the commission paid, plus interest. The estimated loss is based on economic analysis of the difference in APRs between DCA and non-DCA loans. The FCA has set an APR adjustment of 17% for post-2014 agreements and a higher rate of 21% for pre-2014 cases, reflecting evidence that more harmful forms of DCA were more prevalent and financial losses were greater in the earlier period. In approximately one in three cases, compensation will be capped to ensure consumers are not placed in a better position than if they had been treated fairly.

The average payout is expected to be £829 per agreement. Firms are estimated to pay out £7.5 billion in redress, down from £8.2 billion at consultation, with total costs to lenders, including non-redress expenses such as administration, estimated at £9.1 billion, compared with £11 billion initially projected. The FCA estimates that handling complaints without an industry-wide scheme would have cost more than £6 billion extra.

The regulator has also streamlined how the scheme will operate in order to speed up compensation and reduce costs. Lenders will not be required to use recorded delivery and will only need to contact customers who are actually owed money, rather than their entire customer base. This alone is expected to cut firms’ delivery costs by more than 40%. Those who have already complained should receive compensation sooner, with lenders having three months from the end of the implementation period to inform complainants of their entitlement. The implementation period runs until 30 June 2026 for post-2014 loans and 31 August 2026 for earlier ones. Millions of consumers are expected to receive compensation this year, with most of the remainder compensated by the end of 2027.

Danni Hewson, head of financial analysis at AJ Bell, noted that for millions of motorists the announcement brings them a step closer to receiving money they are owed. She highlighted that buying a car is often the second largest purchase a person makes, and that many consumers never look beyond monthly payments to consider the interest they are paying or whether a better deal exists. She welcomed the fact that lenders, rather than consumers, will be responsible for making contact, which should reduce the need for motorists to turn to claims management companies, which typically take a portion of any payout.

The FCA has established a taskforce with the Solicitors Regulation Authority, the Advertising Standards Authority and the Information Commissioner’s Office to tackle poor conduct by some claims management companies and law firms already handling motor finance claims. Consumers are also being urged to exercise caution with unsolicited emails or messages urging quick action on claims, given the risk of scammers exploiting the situation.

Despite the scale of the scheme, the FCA says the motor finance market has remained resilient. Share prices of affected UK-listed lenders rose significantly following the Supreme Court judgment, new car sales in February reached a 22-year high, and a record £41 billion was lent on motor finance in 2025. The regulator anticipates continued availability of finance and strong competition between lenders, and concludes there will be limited long-term impact on the new car finance market. There remains a possibility, however, that further legal action from lenders or complainants could delay the process.