FCA Motor Finance Redress Scheme (PS26/3) Explained

What Is the Redress Scheme?

The FCA Motor Finance Redress Scheme (Policy Statement PS26/3) is a formal programme set up by the Financial Conduct Authority to compensate consumers who were overcharged on car finance due to hidden commission arrangements.

In simple terms: when you bought a car on finance through a dealer, the dealer often earned a secret commission from the lender. The more interest the dealer added to your loan, the more commission they earned. You were not told about this, and it meant you paid more than you should have.

The FCA has now said this was wrong, and lenders must pay back the difference.

Why Did This Happen?

For years, car dealers in the UK operated under what were called discretionary commission arrangements (DCAs). Under a DCA, the lender would set a minimum interest rate, but the dealer could increase it. The higher the rate the dealer set, the more commission they earned.

This created an obvious conflict of interest. The dealer was supposed to be helping you find affordable finance, but they were financially incentivised to make your loan more expensive. And crucially, they did not have to tell you about this arrangement.

The FCA identified this problem and banned DCAs from January 2021. But the damage had already been done to millions of consumers who took out finance between 2007 and 2021.

The Supreme Court Ruling

The legal foundation for the redress scheme was established by the Supreme Court in Hopcraft v Close Brothers [2025] UKSC 33. This landmark ruling found that:

• Car dealers acted as agents of the borrower when arranging finance, meaning they owed the customer a duty to act in their best interests.
• The payment of secret commissions by lenders to dealers was unlawful because it was not disclosed to the consumer.
• Consumers are entitled to compensation for the excess interest they paid as a result of these arrangements.

This ruling applied not just to discretionary commission models but to all commission arrangements where the consumer was not properly informed. It significantly broadened the scope of who can claim.

Who Is Affected?

You are likely affected if:

• You took out PCP, HP, or conditional sale finance for a vehicle
• The finance was arranged through a car dealership
• The agreement was between 2007 and January 2021
• You were not told about commission paid to the dealer

The FCA estimates that millions of UK consumers could be affected. The total bill for lenders could run into billions of pounds. Whether your finance is still active or has been fully repaid, you may still be eligible.

What Do You Need to Do?

The process is straightforward:

1. Check your eligibility — Use our free checker to see if your agreement qualifies.
2. Submit a complaint to your lender — MoneyShield generates the letter for you. Send it to your lender's complaints department.
3. Wait for a response — Lenders have 8 weeks to investigate and respond.
4. Accept or escalate — If they offer compensation, accept it. If they reject your claim or you think the offer is too low, escalate to the Financial Ombudsman Service for free.

You do not need a solicitor or a claims management company. You can do this entirely for free.

How Much Could You Get?

Compensation depends on several factors: the commission rate, the finance amount, the length of the agreement, and when it was taken out. The FCA scheme requires lenders to:

• Refund the excess interest you paid due to the inflated commission
• Add 8% simple interest per year from the date of the agreement
• Account for any tax deductions required by HMRC

Typical payouts range from a few hundred pounds to several thousand, depending on the size of the original finance agreement and the commission structure used.

Key Dates and Deadlines