Millions of drivers will discover how much can they claim over the car finance scandal on Monday, as the City regulator sets out the final terms of its compensation scheme.
The Financial Conduct Authority (FCA) will release the details of its redress programme for 14m motor finance agreements after 4.30pm, ensuring that the information comes out after stock markets close for trading.
Regulators want to avoid large price fluctuations in the share prices of the biggest stock market-listed car loan providers, including Lloyds Banking Group, Santander, Barclays, and the specialist lender Close Brothers.
The companies have been lobbying against the FCA’s proposals, which were put out for consultation in the final months of 2025, arguing that they amounted to a too-generous compensation bill for drivers.
The FCA scheme is intended to draw a line under the car finance scandal, whereby drivers were overcharged for loans as a result of controversial commission payments between lenders and car dealers.
The regulator’s proposals – outlined over 360 pages – suggested an £11bn scheme, made up of £8.2bn in compensation for borrowers and an additional £2.8bn in administrative costs. That was far less than the £44bn bill that some analysts said could materialise from the scandal.
However, it would mean individual compensation payouts among the 14m unfair loans would be about £700 on average, far less than the £1,500 average payout that groups such as the all-party parliamentary group on fair banking say consumers should be due.
The proposal, put out after a landmark supreme court case last August, drew criticism from both sides. Car lenders argued it was too generous to consumers, and continued to warn that a large bill could disrupt the car finance market, resulting in fewer or more expensive loans and pushing some lenders into failure.
Meanwhile, claims law firms and consumer groups alleged that borrowers would end up being shortchanged by the FCA’s proposed scheme, with consumers likely to get higher payouts via the courts, even with claims law firms taking a third of potential payouts.
There are now fears that the scheme could be circumvented or delayed by aggrieved parties.
Individual lenders as well as the Financing and Leasing Association lobby group have not ruled out challenging the FCA’s final proposals in court. Claims law firms have also signalled they could consider legal action.
It also emerged last week that the claims law firm Courmacs Legal is planning to file a £66m omnibus claim on behalf of 30,000 borrowers who believe they were financially harmed by car loan contracts set up by Lloyds’ motor finance arm, Black Horse. By joining the omnibus scheme, consumers are pre-emptively waiving their rights to the FCA’s eventual scheme.
The government has been watching developments closely, having been the subject of heavy lobbying, including by the motor finance industry. Warnings from lenders have already prompted controversial interventions by the chancellor, Rachel Reeves, who last year cautioned judges against giving large payouts to consumers. Reeves also considered overruling the supreme court in the event that it sided too closely with consumers.
