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

Important update: The FCA redress scheme is partially suspended

This article was written before recent developments around the FCA’s redress scheme. If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

The Financial Conduct Authority (FCA) estimates that lenders will pay an average compensation award of £829 per eligible motor finance agreement under its final redress scheme rules. While that figure has understandably become a headline number, it should not be treated as a forecast of what you will receive or a cap on the compensation that may be due to you.

Some consumers will receive less than £829. Some will receive nothing under the scheme because their agreements fall outside its scope, but may still have other complaints or claims worth investigating. Others may receive more, and in some cases significantly more, depending on the facts of their car finance agreement, the commission arrangements involved, when the agreement was entered into, and whether there are additional claims outside the FCA’s scheme.

In Policy Statement PS26/3, the regulator estimates that 12.1 million motor finance agreements are eligible for compensation and that the total redress paid could amount to £7.5 billion if the expected 75% uptake is met. The scheme is intended to compensate consumers who were treated unfairly between 6 April 2007 and 1 November 2024 because they were not clearly informed about certain commission arrangements or contractual ties.

Why the FCA average may not reflect your redress award

The FCA’s £829 estimate is a market-wide average because the redress scheme applies to a wide range of motor finance agreements entered into over more than 17 years, with a broad spectrum of commission and pricing models used during that time. The estimated 12.1 million agreements eligible for compensation will differ in several respects, including:

• the amount borrowed;
• the length of the agreement;
• the interest rate charged;
• the commission paid to the broker or car dealer;
• whether the agreement involved a discretionary commission arrangement (DCA);
• whether there was a high commission arrangement;
• whether there was a relevant contractual tie between the dealer and lender; and
• when the agreement was entered into.

The FCA’s redress rules also use different methods of calculating redress. Most eligible agreements will be compensated under the scheme's standard 'hybrid remedy.' A smaller group of agreements that closely align with the Supreme Court’s decision in Johnson will receive all commission plus interest.

You may have more than one eligible agreement

A point often overlooked in reporting around the redress scheme is that the £829 average is per agreement, not per person.

This distinction matters because, if you entered into multiple car finance agreements between 6 April 2007 and 1 November 2024, compensation may be due on more than one agreement if each falls within the FCA scheme.

This is one reason why identifying all your historical car finance agreements matters. If you only remember your most recent lender or rely on lenders contacting you, you may miss eligible agreements that could increase your total compensation award.

Your agreement may have involved an undisclosed high commission

The FCA’s final rules define a high commission arrangement as one in which the commission is 39% or more of the total cost of credit and 10% or more of the loan. Where such a commission was not adequately disclosed, the agreement may fall within the scope of the scheme.

In general terms, the larger the commission and the more significant its impact on the cost of credit, the greater the possibility that your compensation award will exceed the average.

However, having had a high commission arrangement does not guarantee you will receive a substantially higher payment. High commission cases that do not qualify for the Johnson remedy will generally be subject to the regulator’s hybrid remedy. This mechanism is designed as a middle-ground calculation that balances the actual commission paid to the broker against the financial loss the FCA estimates you suffered. As this remedy blends these two figures, with compensatory interest added, the final compensation amount can vary significantly based on the specific mathematical details of your agreement. The FCA's rules also include caps intended to prevent consumers from receiving more than they would have received had they been treated fairly.

Your case may be subject to the Johnson remedy

The regulator says that approximately 90,000 cases will receive redress of all commission plus interest under the Johnson remedy. These are cases involving an undisclosed contractual tie and/or a DCA, together with a high commission of 50% or more of the total cost of credit and 22.5% or more of the loan amount.

While returning all commission plus interest represents, in the context of the scheme, the ‘gold standard’ of redress, the criteria to qualify are exceptionally strict. As a commission must account for at least 50% of the total cost of credit to trigger this remedy, it represents a very narrow path that lenders will undoubtedly scrutinise closely. This demanding threshold reinforces why having a professional representative verify your lender’s calculations is so important. Without an expert review, you risk a lender incorrectly categorising a Johnson-level claim as not being one.

However, where an agreement involved both serious non-disclosure and very high commission, the Johnson remedy remains one of the clearest reasons why your compensation award could exceed the FCA’s estimated average.

Older agreements may attract more compensation

The regulator has split the redress scheme into two periods:

• agreements entered into from 6 April 2007 to 31 March 2014; and
• agreements entered into from 1 April 2014 to 1 November 2024.

This split is not simply administrative; it can also influence redress calculations. For most eligible cases that do not qualify for the Johnson remedy, the FCA’s hybrid remedy includes an estimated loss element based on an APR adjustment. This is:

• 21% for agreements entered into from 6 April 2007 to 31 March 2014; and
• 17% for agreements entered into from 1 April 2014 to 1 November 2024.

These figures reflect the regulator’s view that more harmful forms of DCA were more prevalent in earlier years. Consequently, some older agreements may receive higher compensation than similar later agreements.

Eligible older agreements may also attract more compensatory interest, as interest is calculated from the date of overpayment to the date compensation is paid. The FCA confirmed in PS26/3 that simple interest will be paid at the annual average Bank of England base rate plus one percentage point, with a minimum interest rate of 3% in any year.

That does not mean every older agreement will result in a higher award, as some older cases may be more complex to evidence or may involve exclusions. However, where an older agreement is in scope and compensation is due, its age may be one factor in increasing the total redress.

Higher borrowing costs may increase your award

The regulator’s average compensation figure blends a broad range of claims and potential outcomes.

Consumers who borrowed a relatively modest amount over a short term may receive less than the average. In contrast, consumers who borrowed more, had a higher total cost of credit, or had a longer agreement may receive more, provided the agreement falls within the scheme, and the relevant commission or disclosure issue affected the cost of credit.

There are limits to this point. The FCA has excluded what it calls very high-value loans—loans that were higher than 99.5% of other loans in the relevant year—from its redress scheme. These agreements are not suitable for a mass-market redress scheme. However, affected consumers can still complain directly to their lender and, where appropriate, refer their complaint to the Financial Ombudsman Service (FOS).

This illustrates a wider point: the regulator’s scheme is designed to process large volumes of mainstream motor finance complaints consistently, rather than to provide a bespoke assessment of each case.

You may have additional claims outside the redress scheme

A further concern around the redress scheme is that accepting a compensation offer from a lender may limit your ability to pursue additional complaints or claims arising from the same agreement, depending on the wording of the settlement.

These may include:

• irresponsible or unaffordable lending;
• mis-sold GAP insurance or other add-on products;
• undisclosed commissions on add-on products; and
• interest charges where add-ons were rolled into the car finance agreement.

These are not the same as motor finance redress under the regulator’s scheme and may require separate investigation, evidence, and routes to redress.

For example, a complaint that your lender should not have offered you car finance at all because the agreement was unaffordable will require different evidence from a complaint about undisclosed commission on an add-on product.

Consequential loss is another area that may affect the total value of your claim. If inflated motor finance payments caused you to rely on your overdraft, use credit cards or other borrowing, or fall into arrears and incur charges elsewhere, those losses are unlikely to be captured by a standardised redress scheme payment.

You may have reasons to pursue redress outside the scheme

The FCA’s redress scheme is intended to be free and efficient and, as such, it will be the most practical route to compensation for many consumers. However, it is not the only possible route. The regulator has confirmed that consumers can choose not to participate in the scheme and instead go to court, where they may receive more or less compensation depending on the facts of their case. Although the redress scheme framework may influence how some parties assess settlement, it does not bind the courts as a judgment would. The FCA has also warned that court claims are uncertain and that, after legal fees, consumers may end up with less overall than they would have received through the redress scheme.

That caution is important. Litigation is not a guaranteed route to a higher award. However, it may be worth considering in some circumstances, including where:

• you have additional complaints not addressed by the scheme;
• you believe you suffered consequential loss not covered by the scheme;
• your lender says you are not eligible for the redress scheme, and you wish to dispute that conclusion; or
• you believe the scheme methodology does not reflect your actual loss accurately or adequately.

Legal challenges may affect the final position

The FCA’s redress scheme is subject to four legal challenges: one from advocacy group Consumer Voice and three from lenders, namely Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. These challenges create uncertainty around the timing and operation of the scheme. Depending on their outcome, they may also affect how some parts of the scheme work. However, consumers should not assume that the challenges will necessarily lead to higher compensation or that the scheme will be withdrawn.

How a solicitor can help

You do not need to instruct a solicitor to bring a motor finance complaint. However, professional representation may be valuable where a fuller review of your circumstances is needed to assess whether the FCA scheme may understate your position.

A solicitor can help:

• identify all your historical motor finance agreements;
• request relevant disclosure;
• assess whether the lender has applied the scheme rules correctly;
• review and verify any compensation offer you receive; and
• consider whether there are additional issues outside the scheme warranting further investigation or separate complaints.

These issues may include irresponsible lending, mis-sold GAP insurance or other add-ons, and consequential losses linked to inflated motor finance payments.

This does not mean that instructing a solicitor guarantees a higher or above-average compensation award. It does not. However, it can reduce the risk that your complaint is assessed too narrowly, that relevant agreements are missed, or that additional claims outside the scheme are overlooked.

Register your motor finance claim with Harcus Parker

The value of your motor finance complaint will depend on the facts of your agreement and any wider issues that may require investigation.

If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, your compensation may be higher than the estimated average depending on the agreement, the commission arrangements involved, when it was entered into, and whether you have grounds to bring additional claims outside the redress scheme.

Harcus Parker can help identify your agreements, contact your lenders, manage your complaint, review lender responses and compensation offers, and investigate whether you have grounds to bring further claims.

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