What should you do if your lender says you are not owed car finance compensation?

As of September 2026, the Financial Conduct Authority’s (FCA) motor finance consumer redress scheme remains partially suspended, with compensation payments not expected to begin until at least 2027. One of the most significant elements of the scheme that remains live is that lenders must continue to assess complaints and tell consumers who have complained if they are not owed compensation under the scheme by either 18 November 2026 or 18 January 2027, depending on when their agreement began.

Whilst many letters informing consumers they are not eligible for compensation under the scheme will be correct, some may not be. A decision that you are not owed compensation is one based on your lender’s own assessment, and you should not take any such communication as being the end of the matter.

Why are lenders issuing redress decisions during a suspension?

In its statement published on 2 July 2026, the regulator confirmed that although lenders do not currently have to calculate or pay compensation, they must continue to identify relevant complaints and agreements, and must respond to complainants who are not owed compensation under the scheme by:

• 18 November 2026, where the agreement began on or after 1 April 2014 and the complaint was made by 30 June 2026; or
• 18 January 2027, where the agreement began before 1 April 2014 and the complaint was made by 31 August 2026.

Complaints made after those dates should receive a response within five months. The FCA has also said that it will not treat a lender as non-compliant as long as it responds within seven weeks of the relevant deadline. In practice, this adds almost two months to each of the dates above.

Lenders do not have to tell you that you are not owed compensation where the lender:

• considers your complaint to be out of time, per the final scheme rules; or
• relies on the exception for contractual ties involving visible links between the lender, manufacturer and franchised dealer.

Both of these issues form part of the legal challenges before the Upper Tribunal. If your agreement falls into either category, you may hear nothing for now but should not take that to mean that you will definitely be eligible for redress should the scheme be upheld.

Note that your lender will only write to inform you that you are not owed compensation if you have already raised a complaint. If you have yet to complain, your previous motor finance lender(s) will not proactively tell you that they do not owe anything. Under the current scheme rules, if you do not proactively complain you will only hear from your lender after the scheme begins if they believe they may owe you money. Complaining now means that you should hear from your lender within five months if you are not owed compensation. If you are owed compensation, complaining now should also mean that you hear from your lender and receive an offer and payment more quickly once the scheme begins.

What does a decision that you are not owed compensation actually mean?

If your lender writes to you to inform you that they do not owe you anything, it means they have assessed your motor finance agreement against the criteria set out by the FCA in Policy Statement PS26/3 and concluded that none of the three relevant arrangements the scheme covers was present. Those arrangements are:

• discretionary commission arrangements (DCAs), which allowed the broker to adjust your interest rate and earn more commission as a result;
• high commission arrangements, defined by the regulator as commission that was at least 39% of the total cost of credit and at least 10% of the amount you borrowed; and
• contractual ties between the broker and the lender.

It does not necessarily mean that your agreement was fairly sold. It means that, based on your lender’s analysis of its own records, your agreement does not fall within the scheme’s scope.

Your lender is assessing its own conduct

We have previously recognised the credit the FCA’s work in the motor finance space deserves. However, the lender-led nature of the scheme remains an area of significant concern. The companies that designed the commission structures behind the estimated 12.1 million motor finance agreements now eligible for compensation are the same companies now deciding whether consumers’ agreements were fair or unfair, using data that only they hold. In some cases, there may also be significant gaps in that data, as outlined by the regulator in its feedback on lenders’ motor finance redress scheme implementation plans, which it published on 19 August 2026.

The regulator’s findings show that these concerns are not theoretical, and that they apply across the market.

What might your lender get wrong?

There are several points at which your lender’s assessment may go wrong, and most of them are invisible from the letter you will receive. The FCA’s review of lenders’ implementation plans as they stood approximately six weeks after the publication of PS26/3 identified where the significant weaknesses may lie.

The data used to assess your agreement

The FCA found firms assuming their internal data was sufficient without explaining how they reached that conclusion. It also found firms with no clear process for handling missing records, unanswered requests to brokers, or brokers that have ceased trading. Your agreement will be assessed on the records your lender holds, which may be incomplete. This means that a lender could make a decision based on assumptions rather than on an accurate record of what your agreement contained and whether you were overcharged.

Automated and group-based decisions

Many lenders plan to assess agreements in cohorts rather than individually. While this is somewhat understandable given that the purpose of any industry-wide redress scheme is to deliver compensation at scale, the FCA describes this approach as ‘concerning where firms are relying on automated systems to process agreements at pace’, noting that such decisions ‘can directly affect whether consumers receive redress’.

How your commission was categorised

Whether your agreement used a DCA or was subject to a fixed commission or contractual tie is a question of how the car dealer or your broker was actually paid, not how your paperwork described it.

Total cost of credit calculations

Your lender will calculate whether commission was at least 39% of the total cost of credit and at least 10% of the amount borrowed. What it includes within the total cost of credit figure may be enough to move an agreement either side of the 39% threshold.

Rebuttals

Lenders may incorrectly apply a rebuttal to your complaint or say an agreement was fair despite an unfair feature being present. The FCA said that weaker plans it reviewed mentioned rebuttals ‘without explaining the evidence base or decision process’.

In addition to these issues, the regulator also found that quality assurance frameworks were underdeveloped, meaning lenders may not reliably identify and correct these errors themselves.

Can you still escalate a decision to the Ombudsman?

Under the redress scheme rules, you retain the right to complain to the Financial Ombudsman Service (FOS) if you are dissatisfied with your lender’s response.

However, the FOS will not review your complaint until you have a redress determination from your lender, or until the deadline for your lender to provide one has passed. A letter telling you that you are not owed compensation under the scheme may itself be a redress determination. If you receive a letter from your lender stating that you are not owed compensation, but which is not described as a redress determination, the Ombudsman’s advice is that you should go back to your lender and ask for one.

Once you have a redress determination, you can refer your complaint to the Ombudsman without first asking your lender to reconsider.

The partial suspension of the redress scheme does not close this route. When the FCA confirmed which obligations lenders must continue to adhere to, it stated that they must continue to cooperate fully and promptly with the Ombudsman on complaints referred to it, and also explicitly stated that consumers who remain unhappy after being told they are not owed compensation can refer their complaint to the FOS.

What the FOS will and will not look at

Where your complaint sits within the redress scheme rules, the Ombudsman can only consider whether your lender followed them. It cannot conduct a fresh assessment of whether your motor finance agreement was fairly sold.

There is a practical consequence of that, and one that highlights why there may be a benefit in instructing a professional representative to manage your motor finance claim. When you refer your complaint to the FOS, the Ombudsman will ask for an explanation of why you believe your lender did not follow the rules. Few consumers will be able to see and understand what calculations or assumptions their lender has applied. This makes it difficult to do what the FOS requires, which is to identify where you believe the rules were not followed, rather than simply to state that you disagree with the outcome.

The usual FOS deadlines will still apply

The time limit for referring your complaint to the FOS runs from the date your lender sends you a redress determination. The letter you receive is required to tell you explicitly what the deadline is, which will generally be six months from the date it was sent.

Remember that corresponding with your lender in the meantime does not extend the deadline.

Being told you are not owed compensation under the scheme does not mean that you have no claim

The regulator’s redress scheme is deliberately narrow and deals with commission arrangements attached to the motor finance agreement itself and nothing else, as we previously set out in our guide to what the redress scheme will not compensate you for. A decision that you are not owed anything under the scheme says nothing at all about:

• add-on products or policies you may have been sold alongside the vehicle, such as GAP insurance, alloy wheel cover, tyre insurance and cosmetic cover;
• irresponsible lending, where the motor finance agreement should never have been offered to you in the first place;
• consequential loss, where inflated payments caused you to borrow elsewhere, potentially at a higher cost, or to fall behind on your other financial commitments; or
• whether the interest on your motor finance agreement was calculated correctly and in accordance with your contract.

These are separate complaints that are not affected by the suspension and are not decided by the scheme. Most crucially, a lender reviewing your motor finance agreement will not consider or raise any of these issues. We recently reviewed what happens to any GAP insurance element of a motor finance complaint under the current partial scheme suspension.

What to do if you receive a letter saying you are not owed compensation

Note the date it was sent

Your deadline for referring your complaint to the FOS runs from the date the letter was sent, not the date you read it.

Check which agreements it covers

You may have had more than one motor finance agreement during the period covered by the scheme, with the same or with multiple lenders. If so, check which agreements the decision covers, as you may have several agreements with the same lender where some are eligible for redress and some are not.

Ask for the reasoning

If it is not provided in the letter, you are entitled to understand how your lender concluded that you are not owed compensation. This includes asking what commission you paid and how it was categorised.

Consider asking your lender to review it

The FCA’s advice for consumers in its statement on 2 July 2026 is to ask your lender to review its decision before escalating to the FOS, although this is not an explicit requirement. 

Consider what falls outside the scheme

Your lender’s decision only covers commission on the finance agreement, as set out above.

Register your motor finance claim with Harcus Parker

You do not need professional representation to complain to your lender and receive compensation, or to challenge a decision, and you can do all of this at no cost. The FOS is also free for consumers to use.

If you choose to instruct us to manage your motor finance complaint, we can:

• identify all of your motor finance agreements dating back to 6 April 2007, even if you do not recall who your lenders were or no longer hold any paperwork;
• request disclosure of the commission you paid and how it was categorised;
• review any lender decision that you are not owed compensation and challenge it where we consider it wrong;
• assess your lender’s redress calculations if the scheme proceeds following the Upper Tribunal hearings and you are found to be owed compensation; and
• investigate additional claims that fall outside the scheme entirely.

We should caution that instructing a solicitor does not guarantee that you will receive compensation or that you have a valid claim. However, it does mean that you may benefit from a professional examination of a decision a lender has made about its own conduct and redress liabilities.

You can check your eligibility and register your car finance mis-selling claim here.