Why might I receive less car finance redress than the estimated average?

The Financial Conduct Authority (FCA) estimated, in its final redress scheme rules, that lenders would pay an average of £829 compensation on each eligible motor finance agreement. You should now read that estimate alongside the legal challenges brought against the scheme, which the regulator says are unlikely to be heard by the Upper Tribunal before October 2026.

Whilst this is an increase from the approximately £700 average estimated in the FCA's redress scheme consultation, it is not a guaranteed payment and you should not treat it as a forecast of what you will receive. The figure is useful as a broad indicator of the scheme's scale, but the value of any individual complaint will depend on the facts of the agreement.

Some consumers will receive around £829, others will receive more, and many will receive less. Some will receive no compensation under the scheme at all if their agreement falls outside its scope or is subject to an exclusion or rebuttal in the final rules.

In Policy Statement PS26/3: Motor Finance Consumer Redress Scheme, the regulator estimated that 12.1 million agreements entered into between 6 April 2007 and 1 November 2024 would be eligible for compensation under the scheme, representing approximately 37% of agreements made during that period. This figure is down from 14.2 million at the consultation stage. The FCA also estimated that the scheme would result in lenders collectively paying £7.5 billion in redress if its expected consumer uptake rate of 75% is met.

Whilst these figures are substantial, they also demonstrate that most agreements entered into during the relevant period will not fall within the scope of the scheme.

Why the £829 average may be higher than your award

The regulator’s £829 figure is a market-wide average. It combines agreements that may produce modest awards with a smaller number that may produce substantially higher redress.

Your compensation may fall below the average because of factors such as:

• the amount you borrowed to finance your vehicle purchase;
• the term of your agreement;
• the interest rate that applied;
• the amount of commission actually paid to the broker or dealer that arranged your motor finance;
• whether your agreement involved a discretionary commission arrangement (DCA), high commission arrangement, or contractual tie, and how that affected what you paid;
• when you entered into the agreement; and
• whether any caps, exclusions, or lender rebuttals apply.

The scheme will not give every affected consumer the same amount. It will apply a standard methodology to each agreement, based on the relevant features of that agreement.

Your agreement may have involved a smaller loan or lower borrowing costs

Within the scheme, compensation is linked to the financial impact of the unfairness identified. If you borrowed a modest amount over a shorter term, paid a lower total cost of credit, had a smaller commission included in your agreement, or saw only a modest effect on your interest rate, the redress calculation may produce a smaller award.

This does not mean that your complaint lacks merit. It means that a valid complaint may still result in redress below the headline average. It also does not take into account separate issues, such as consequential loss, which you may need to pursue outside the scheme.

Most eligible consumers will not receive a refund of all commission

Only the most serious cases under the scheme will receive all commission plus compensatory interest. These are cases that fall within the FCA’s Johnson remedy, where the agreement involved an undisclosed contractual tie and/or a DCA, together with a very high commission of 50% or more of the total cost of credit and 22.5% or more of the loan. The regulator estimates this will affect approximately 90,000 agreements, equivalent to around 0.7% of the 12.1 million agreements eligible for redress.

Most eligible consumers will receive compensation calculated using the regulator’s hybrid remedy. This methodology will see compensation based on the average of the estimated loss and the commission paid, with compensatory interest added.

Some consumers may assume that an undisclosed commission automatically means lenders will refund all of the commission they paid. In most cases, that will not be the outcome.

Unless your agreement falls into the more serious category, your redress calculation under the standard hybrid remedy may result in an award below the £829 average, particularly where the estimated loss and commission paid were relatively low, or your agreement is subject to one of the FCA’s caps.

Your compensation may be capped

The regulator introduced caps in its final rules to prevent consumers from receiving more redress than the FCA considers necessary to reflect what they would have paid had they been treated fairly. This essentially means that if your calculated loss exceeds the total interest you paid, the scheme restricts your payout so you do not ‘profit’ beyond your actual cost of borrowing. The FCA estimates that compensation will be capped in around one in three cases.

The redress rules state that, for consumers receiving compensation calculated using the hybrid remedy, their award will be capped at the lowest of:

• 90% of commission plus interest;
• the total cost of credit, adjusted to account for a minimal cost of credit offered to only 5% of the market at the time, excluding zero-APR deals; or
• the actual cost of credit, calculated on a simpler basis if lenders cannot calculate the actual adjusted cost of credit.

That means that, if the initial calculation produces a figure above one of these limits, the final award will be reduced to the lowest applicable cap. This is one reason why the final award may be lower than the initial calculation suggests.

Your interest rate may have been among the cheapest available

One of the more significant exclusions in the final rules applies where the APR was in the lowest 5% offered in the market at the time, excluding zero-APR deals. The FCA estimates that approximately 64,000 agreements will receive no compensation for this reason. The FCA reasons that if you had one of these agreements, your APR would have been among the lowest available at the time.

This may feel counterintuitive, particularly if you were unaware that your lender paid a commission to the dealer or broker. However, the FCA scheme does not only consider whether disclosure was inadequate, but also whether the relevant arrangement caused harm that lenders should compensate under its methodology.

If your agreement falls into this lowest 5% category, the regulator’s position is that no compensation is payable under the scheme.

The commission in your agreement may fall below the scheme threshold

The FCA's final rules also consider small-commission agreements fair under certain circumstances. Your agreement will be considered fair under the scheme if the commission was:

• £120 or less for agreements beginning before 1 April 2014; or
• £150 or less for agreements beginning on or after 1 April 2014.

The regulator’s position is that commission amounts below these levels are unlikely to have influenced the broker’s decision or your decision to proceed with an agreement. This means that, even if your agreement included an undisclosed commission, you may receive no redress under the scheme if the commission was below these thresholds.

This is another area where the FCA’s rules may produce an outcome that feels counterintuitive to consumers. The scheme is concerned with defined categories of unfairness, not every failure to make full disclosure in isolation.

You may have had a zero-APR PCP agreement

The regulator’s final rules state that your agreement will be considered fair if you were not charged any interest. This will be particularly relevant if you took out PCP finance as part of a promotional offer. The FCA reasons that, if you did not pay any interest, there may be no commission-related borrowing cost to refund through the scheme. This was one of the areas addressed when the FCA finalised the scheme rules after consultation.

This does not necessarily prevent you from complaining about other aspects of the sales process. However, within the redress scheme, a zero-APR agreement will not, on its own, generate compensation.

Some contractual ties are excluded from compensation

Although contractual ties are one of the three relevant arrangements under which an agreement may be eligible for redress, the final scheme rules exclude some tied arrangements where there were visible links between the lender, manufacturer, and franchised dealer. The FCA cited situations in which each party shared a common or similar name or branding as examples.

This matters because some consumers may assume that any exclusive or near-exclusive relationship between a dealer and lender will lead automatically to compensation. It will not.

Your agreement may fall outside the scheme completely

Some agreements entered into within the period covered by the scheme will fall outside its scope. The scheme will not apply if you:

• leased a vehicle through a personal contract hire arrangement;
• have already had a complaint considered by the Financial Ombudsman Service (FOS) or determined by a court;
• have already accepted a compensation offer;
• had an agreement where the amount of credit exceeded £25,000, was entered into before 6 April 2008, and was for business purposes;
• had what the FCA defines as a high-value loan; or
• fall outside the relevant time limits, although this applies to a very small number of cases.

The regulator defines a high-value loan as a loan that was higher than 99.5% of other loans in that year. Loans above the relevant annual threshold are excluded from the scheme unless the loan was specifically for a vehicle adapted for accessibility purposes.

If your agreement falls outside the scheme's scope, that does not automatically mean you have no grounds for complaint. If you are excluded from the scheme because you had a high-value loan, for example, you can still complain to your lender and escalate to the FOS if you are dissatisfied with the response you receive.

Your cash payment may be lower than the redress figure

The scheme rules mean there is also a distinction between the amount of compensation your lender calculates it owes you and the amount of cash you receive. In some circumstances, a lender may be able to set off redress against arrears or default sums connected with the motor finance agreement. Where this happens, the redress may reduce what you owe rather than being paid entirely in cash.

This may still be beneficial, as applying redress to arrears or default balances may reduce what you owe. However, it may mean that what you receive in your bank account is lower than the headline redress figure or what you were expecting.

Your lender should explain in any redress offer how it calculated the award and whether it has applied any set-off.

Compensatory interest may be lower than you expected

The FCA’s estimated average redress figure of £829 includes any compensatory interest added to your base compensation calculation. In its final redress rules, the regulator confirmed that compensatory interest would be calculated using the annual average Bank of England base rate plus one percentage point, with a minimum rate ‘floor’ of 3% in any year. Unlike the consultation proposals, the final rules do not allow consumers to challenge the compensatory interest rate they receive under the scheme.

You may have expected to receive a higher rate of interest, particularly if you have seen comparisons with other types of financial redress or court claims where an 8% statutory interest model has been used. This model does not apply to the redress scheme. Compensatory interest is also calculated on a simple rather than compound basis.

This means that, even if the base compensation figure is meaningful, the interest element may be lower than you expect, particularly if you had assumed that older agreements would automatically attract a much larger uplift.

Legal challenges may alter the final position

At the time of writing, the FCA's motor finance redress scheme is subject to four legal challenges: one from Consumer Voice and three from lenders, namely Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. In a statement on 8 May 2026, the regulator said it is unclear when the Upper Tribunal would hear the challenges, but that it is unlikely to be before October 2026.

The outcome of these challenges may affect the scheme’s timing, methodology, or scope. The FCA has said firms should continue preparatory work, but it will not require them to communicate with customers under the scheme timetable while the timing of the Upper Tribunal proceedings remains uncertain. 

If the scheme, or parts of it, were quashed, the FCA has said lenders may need to prepare for a complaint-led approach, rather than assuming that new rules or redress methodology would be published immediately.

A below-average offer is not automatically wrong

A redress calculation below the widely reported average may be disappointing, but it does not necessarily mean that your lender has made an error.

Legitimate reasons why your redress may be below £829 include, but are not limited to:

• having a smaller loan, a shorter agreement, a lower total cost of credit, or a smaller commission;
• one of the FCA’s caps applying to your award;
• having an agreement that attracts less compensatory interest because you entered into it later in the period covered by the scheme;
• having a low interest rate;
• having a zero-APR agreement or commission below the relevant threshold; or
• having your redress set off against arrears or default sums.

However, you should not accept a lower-than-average offer without understanding how your lender calculated it. When you receive a redress offer, you should be able to understand whether your lender has:

• assessed the correct and relevant agreement(s);
• used the correct data;
• applied the regulator’s rules properly;
• explained any cap or exclusion that was applied and how this affected your compensation award; and
• applied any set-off to your redress.

When a low redress offer may warrant closer scrutiny

A compensation offer below the £829 average or otherwise materially lower than you might expect may warrant closer scrutiny if:

• your lender has not clearly explained how it calculated your redress;
• your lender has applied an exclusion without detailing why;
• you had several agreements, but your lender has only assessed one and has not explained whether the others fall within the scheme;
• your lender says your agreement is outside the scheme’s scope but has not explained why;
• your lender has applied set-off against arrears or default sums that you dispute; or
• you believe your agreement also involves additional issues outside the scheme, such as unaffordable lending or mis-sold add-ons.

You retain access to the FOS if you participate in the redress scheme. However, for complaints within the scheme, the FOS will usually consider whether your lender followed the scheme rules correctly, and will normally do so only after you have received a redress determination or the deadline for your lender to provide one has passed.

This makes your lender's explanation all the more important. You cannot decide whether to accept, query, or escalate a redress offer without understanding the basis on which your lender made it.

How a solicitor can help

You do not need to instruct a solicitor to bring a motor finance complaint. The FCA scheme is free to use, and consumers can escalate complaints to the FOS without paying a fee. The regulator continues to encourage consumers with concerns to complain directly to their lender.

However, professional representation may be valuable where an offer appears lower than it should be, where a lender says your agreement is outside the scheme, or where the broader transaction may involve issues that give rise to additional claims.

A solicitor can help:

• identify all your historical motor finance agreements that fall within the scheme period;
• request and review relevant disclosure;
• verify whether your lender has applied the scheme rules correctly, particularly if it has used any caps, exclusions, or set-off;
• identify whether there are additional issues outside the scheme that warrant a separate complaint; and
• advise whether you should participate in the scheme or pursue your complaint through another route.

Instructing a solicitor does not mean you will receive a higher compensation award. However, it can reduce the risk of accepting an offer without proper scrutiny, missing agreements that fall within the scheme, or overlooking complaints outside the scheme.

Register your motor finance claim with Harcus Parker

The value of your motor finance complaint will depend on the facts of your agreement, the scheme rules that apply, and whether any wider issues fall outside the redress scheme and require separate investigation.

If you have not yet made a motor finance complaint and would prefer professional representation, you can register your claim with Harcus Parker here