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The City regulator has tightened the rules of a mass compensation scheme over the car finance sandal, with fewer than expected victims set to receive £830 on average.
The Financial Conduct Authority (FCA) released the final details of its planned redress programme, saying it had narrowed the number of loan agreements eligible for payouts from 14m to 12.1m contracts.
That tweak, which covers loans agreed between 2007 and 2024, is expected to result in a higher payout for each contract, up from £700 to £830.
The FCA scheme is intended to draw a line under the car finance scandal, in which drivers were overcharged for loans as a result of commission payments between lenders and car dealers.
The FCA’s chief executive, Nikhil Rathi, said the final terms struck a balance for borrowers and banks, with lobbyists on both sides having complained about sums outlined in initial proposals that were put out for consultation in the final months of 2025.
“We’ve listened to feedback to make sure the scheme is fair for consumers and proportionate for firms. It will put £7.5bn back into people’s pockets,” he said.“Now we need everyone to get behind it and ensure millions get their money this year.”
Rathi fired warning shots at firms considering challenging the regulator’s scheme through the courts. “Payouts should not be delayed any longer, especially as household bills come under greater pressure,” he said. “Delivering compensation promptly also gives lenders the chance to rebuild trust and means we can draw a line under the past and support a healthy motor finance market for the future.”
Firms have until 5pm on 27 April to file a complaint, a move that could end up significantly delaying payouts. Individual lenders as well as the Financing and Leasing Association (FLA) 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.
Rathi said: “An industry-wide scheme is the most efficient way of compensating affected consumers while supporting the ongoing availability of competitively priced motor finance for millions who rely on it. Without such a scheme, the cost to lenders of dealing with complaints through the ombudsman or courts is estimated to be over £6bn higher.”
Firms and investors will begin digesting the terms of the scheme, which was released after stock markets closed on Monday afternoon, in hopes of avoiding large price fluctuations in the share prices of the biggest listed car loan providers, including Lloyds Banking Group, Santander, Barclays and the specialist lender Close Brothers.
Close Brothers, which is one of the most exposed lenders to the car finance scandal, said in a statement on Monday that it was “assessing the potential implications of the redress scheme on the group” and would update the market “as and when appropriate”
