Martin Lewis: Car finance FREE reclaim tool & guide

Watch Martin’s initial response video to the FCA announcement:

The car finance mass redress scheme has been announced

On 30 March, the UK's financial regulator, the Financial Conduct Authority (FCA), confirmed its new mass redress scheme on unfair motor finance, with a predicted £7.5 billion to be paid out on an expected 12.1 million agreements from 2007 to 2024.

And 'mass' is the crucial word, as it won't just cover those who make complaints – firms must try and root out everyone who was mis-sold, and contact them.

For now, it remains important to put in a complaint if you haven't already, as you'll get your money far quicker, and there's less chance of you missing out if finance firms don't have your (correct) info.

The 'am I likely affected?' checklist

The criteria covered by the regulator's scheme are...

• Motor vehicle finance: car, van, motorbike and campervan (not caravans, as they don't have motors – but you can still ask about discretionary commission arrangements).

• Eligible dates: The finance agreement had to be taken out between 6 April 2007 and 1 November 2024. Though DCAs were banned from 28 January 2021, now that the mis-selling criteria have been expanded, you may still have been mis-sold car finance right up to November 2024.

• Finance types: Personal Contract Purchase (PCP) and Hire Purchase (HP). Leased cars are NOT included in this scheme.

• Vehicles for personal use (or as a sole trader or small partnership, in which case the loan must be under £25,000). Commuting comes within personal use, but finance taken out by incorporated businesses/limited companies aren't included in the redress scheme.

• You can be eligible even if you've fully paid off the finance deal. You can also claim if you no longer own the car, or even if the car was repossessed.

• If you had multiple eligible car finance deals, you may be due multiple payouts. Each case is individual. Our free tool allows you to make requests by car finance provider (so if you had two agreements with the same firm, you can do that together, but if they were with separate firms, you must this separately).

• It DOESN'T include interest-free finance. If you had a genuine 0% interest deal, then your agreement isn't included in the redress scheme. Even if there was an unfair relationship, for example, if the lender had a contractual tie it didn't disclose, it could be that no redress is due because you wouldn't have got a lower APR from any other lender.

What proposals have changed with the announcement of the final rules?

The most important thing is that it confirmed the mass redress scheme would go ahead. The big picture is it's pretty similar to what we knew from the consultation, yet some things are different...

• It was 14 million mis-sold agreements, now it's 12 million. This is due to increased exclusions, especially on the contractual ties issue.

• The payout was previously estimated at an average of £700, now it's an average of £830, as there'll be higher compensatory interest and higher payout rates for earlier claims.

• The total overall scheme cost was estimated at £11 billion, now it's estimated at £9 billion (with the estimated amount of redress to consumers changing from £8.2 billion to £7.5 billion). This is in part due to fewer agreements being included, but also because the FCA now predicts a 75% take-up rate (rather than the 85% it predicted before).

The THREE ways you may have been mis-sold

There are three categories of car finance mis-selling included in the FCA’s scheme. All of them rely on non-disclosure – in other words, you weren't told this was going on. That means there's no way to know you were mis-sold without checking.

These are the main categories of mis-selling included in the scheme (though do note you may have been mis-sold in more than one way on an agreement):

1. Discretionary commission arrangements (DCAs) – 10.6 million agreements (previously estimated at 11.4 million).
   This was the original form of mis-selling that most people who put in complaints asked about. Here, without telling you, the interest rate you paid was increased in order to pay the dealer or broker extra commission. DCAs were banned on 28 January 2021, so this only applies to finance agreements prior to that.

2. Contractual ties –  1.1 million agreements (previously estimated at 2.4 million).
   This is where a broker didn't adequately disclose it was working exclusively with one lender, or that one lender had a right of first refusal, eg, the dealer said: "We'll go to a panel of lenders to find you the best car finance" but, in reality, one lender had first refusal, so the 'searching the market' was false.
   
   Important change: The FCA has now said if firms can prove there was an obvious link between the dealer and finance firm (eg VW dealer, VW finance; Toyota dealer, Toyota finance; Ford dealer, Ford Finance etc) – and there is evidence of prominent and consistent branding in the consumer journey – it won't count as contractual tie mis-selling. This is what the FCA formally refers to as 'captive and white-label tied agreements'.
   
   This is why there are so many fewer cases here. If this impacts you, you could still have been mis-sold in one of the other two ways.

3. Unfairly high commission –  2.6 million agreements (previously estimated at 2.9 million)
   This was where the amount of commission was 39% (this was in the proposals as 35%, but the final redress scheme confirmed it has increased) or more of the total cost of credit AND 10% or more of the loan. If both those things add up and you didn’t know about it, it was an unfair arrangement.  
   
   There's likely to be a small number of agreements with what's classed as 'very high' commission. This will be where the amount of commission was 50% or more of the total cost of credit AND 22.5% or more of the loan.
   
   If this is the case, the redress scheme is designed so that you'll get more back than other cases (all the commission plus interest). The FCA estimates this applies to around 90,000 consumers.

Important change: There are some more exclusions

Agreements excluded by the redress scheme are:

• those where the commission was £120 or less (for agreements before 1 April 2014) or £150 or less (agreements between 1 April 2014 and 1 November 2024).

• DCAs that weren't used to earn discretionary commission

• agreements with no commission

• high value loans (higher than 99.5% of other loans that year) on the basis they're not suitable for a mass market redress scheme

• if the lender can prove it was fair not to disclose one of the arrangements above, or that you didn't suffer any loss from your agreement.

Already complained using our free tool (or any DIY route)?

More than 3.6 million complaints have been sent via our free tool. What to do now depends on how the firm replied – there are three main categories:

• If the lender said you DID have a DCA: compensation is very likely. So sit tight and wait until after the implementation period (see the 'I've complained' timetable below) and you should be sent a letter or email (or in some cases phone call) telling you how much you're owed, then if you accept it, you'll be paid within a month.

• If it didn't say anything except 'acknowledge receipt', the key is you put in a complaint and it got it. You're on the fast track and don't need to do anything more. See the 'I've complained' timetable below

• If it replied 'you don't have a complaint'. Until the middle of 2025, the FCA was only investigating DCAs, and that's what our complaint letters focused on.
  
  If it wrote back and said you didn't have a DCA, that isn't the end of it, as last year two new mis-selling categories (contractual ties and unfairly high commission) were added, and they cover around 4 million agreements.
  
  Important change: Now best practice is put another complaint in. Although your case will be looked at again by the firm for the other two types of mis-selling, you won't be in the quicker 'I've complained' route, you'll be in the slower 'I've not complained (opt-in)' route (see the complaint timetables below)
  
  That's not ideal, so you can use our complaint tool again now to speed it up, as it now includes all three complaint types.

Further down in this guide we also cover what you can do if you've had a different type of response.

Not complained yet? Do it now, there are free tools to help

You don't need to do anything, but we suggest you use our free car finance reclaim tool.

Under the redress scheme, firms have to identify and contact all the people who were mis-sold that they can, and ask if they want to OPT IN. That's quite something, but there is still a risk those who had older agreements, have moved house, or got married/changed their name might miss out. You'll also likely be waiting longer for a payout if you're in this group.

So we think it's safer to put a complaint in using our free car finance reclaim tool. Then you should be part of the group for whom it's all done automatically and at greater speed – as once you've complained, if you were mis-sold, they must contact you to say it's being processed.

THE TOOL: Free car finance unfair commission tool & template letter

Our free complaint tool now incorporates all three mis-selling types.. Here's how it works...

1. Answer a few questions on the details of your car finance. This includes your address when you got the policy, the car number plate (if you have it), the policy details (if you have it), and the name of the firm. See help if you don't have details.

2. It then builds an email that Martin and MSE have drafted for you. It puts all your info in the right format and asks whether you had a DCA, a contractual tie and/or unfairly high commission, and then says if you did, to count this as a complaint. You can then edit it to add any extra information you think might be useful, such as any name changes, that could help to find your agreement. (PS: we don't data mine or store your info.)

3. It then gives you the correct email address and an easy way to open your email program/app. You'll then be able to check and send the email, which will then be stored in your sent items.

The redress proposals say that firms will be expected to identify and contact all those who have been mis-sold within six months of the scheme starting redress.

However, submitting a complaint could be helpful if you've changed your contact details or moved home since taking out your car finance, as the information you provide will help your lender match you with your car finance agreement.

This template letter is for personal use only. Any other use, without the prior written approval of MoneySavingExpert, is strictly prohibited.

Generally, these things are best done in writing, but if that's too difficult for whatever reason, you can just call, but ask that it's noted down as a formal complaint and request written confirmation.

When will this all happen?

There is a chance the redress scheme could face a legal challenge. The most likely challenge would be a judicial review of the regulator to get it to exclude agreements made before 1 April 2014.

For this reason, the FCA has split the redress scheme into two separate schemes: one from 6 April 2007 to 31 March 2014; the other from 1 April 2014 to 1 November 2024. That way if there's a challenge to the earlier agreements, they can be put on hold while the later ones can continue to be processed.

That means the current planned schedule is:

• Implementation Period: there's a three- to five-month wait until it all starts. If your agreement was made from 1 April 2014, the implementation period ends 30 June. If your agreement it was made before this, it'll end on 31 August.

• Step 2 (for those who complained before implementation period ends). If you've already complained, or do it before the above implementation period ends, within three months you'll be told if you're due compensation and how much. If you accept it, you'll be paid what you're owed within one month of accepting. So that should be October at the latest (December for older agreements)

• Step 2 (for those who've not complained). If the firm thinks you were mis-sold, it must contact you within six months and ask if you want to opt-in to a complaint. You'll then be told if you're owed compensation and how much within three months, and if you accept it you'll be paid within a month. So that will likely be around or after April 2027 (June 2027 for older agreements)

How much will I get?

A cap has been introduced for some agreements

One in three agreements will see the payout capped, so that people aren't put in a better position than they would be had they just got a fair deal. Generally this applies to those where less commission was taken. In general (it's complex) the cap is set at the lowest of:

• 90% of the commission, plus interest

• The cost of the borrowing (in other words, interest generally), worked out against a very cheap benchmark deal (in other words, the cheapest 5% on the market, ignoring interest-free deals).

Compensatory interest will be added

This is to make up for the fact you couldn't use the amount mis-sold over time.

The interest was set for each year from roughly when you got the agreement. It is simple interest (in other words, not compounded), and is set at the Base Rate +1% (with a minimum of 3%).

We don't yet know if this interest would be taxable as savings interest (though it's likely it will if it follows PPI and Bank Charge reclaims). But do remember most basic rate taxpayers can earn £1,000 (higher rate taxpayers £500) of interest a year without being taxed on it due to the Personal Savings Allowance.

What you can do if you've signed up to a claims firm

The FCA redress scheme is designed to make complaining yourself easy, so if you're going through this route (rather than court), then a claims firm won't add much.

Yet if you've already signed up, the main issue is some contracts say they can charge you a 'cancellation fee' that's payable as soon as you cancel, which could be before you get any payout.

Others say a 'success fee' is due if you win (even if you cancel), so do check. If you stick with them, the regulators say you should only be charged for work done.

The regulators – both the FCA and the Solicitors Regulation Authority (as firms can be regulated by one or the other, you need to check yours) – say these charges must be reasonable, but frustratingly they don't define that.

So if you think they're not, make a formal complaint, then if its rejected you can go to the Claims Management Ombudsman (if FCA regulated), or the Legal Ombudsman (if SRA regulated).

Find who to complain to, even if you don't have details

Had a different response or no response? What to do next

Since we launched the tool in back February 2024, MSE users have told us they've received a mixed bag of responses. So here, we take you through 'what's next?' if you’ve had a different type of response.

It has only 'acknowledged your complaint'

If it didn't say anything, other than acknowledging your complaint, that's frustrating but there's nothing else to do for now, as it is logged for the purposes of the redress scheme, so the lender should be in touch with you within three months of the scheme starting to let you know if you're eligible for a payout.

You’ve had no response at all

By this we mean, not even a: “we've got your email, and we'll reply in due course." This is obviously frustrating, as you won't know for sure that your email has got to the firm. So before you do anything else:

• Check your sent box: Is the email definitely in your sent messages?

• Check your junk mail: Check the reply isn't in your spam/blocked list.

• Check the address you sent it to: Especially if you didn't use contact details automatically filled in by our tool.

Only if all those check out, remember you gave a month for your car finance provider to respond, so wait until that time before doing anything. But at that point, if you still haven't heard anything at all you should follow up with the firm.

If you want to report a firm that hasn't replied even after you've waited and chased, you can tell the FCA. On its contact page, scroll down to the box that says ‘Ask us a question or report a scam’, then select Consumer, and Consumer Credit. Use the form to explain about the delay with the firm acknowledging. You can also attach screenshots of your emails if you wish

You’ve been told ‘you had a DCA but we've rejected your complaint, you can go to the ombudsman’

This is rare, but it has happened. Most important here is your provider's confirmed you had a DCA and has logged your complaint.

If you haven’t yet gone to the Financial Ombudsman, the lender should now review the complaint in line with the redress scheme rules, and get in touch with you if you’re due a payout.

Find on what you need to do if your complaint has already progressed further.

It says 'we need more info' or 'we can't find your info'

A lender might legitimately need more info – especially if you've moved home or changed your name – as it has an obligation to ensure it's dealing with the right person.

If you do get a request for further info or ID, make sure it's definitely come from the provider you complained to – check the email address and that they've correctly noted any details you supplied. And even if you don't have the exact type of ID or info they're asking for, go back to them with what you can supply – as it should work with you to validate your complaint.

If you've given it all the info you can, and it still can't locate you, this is trickier. The FCA says firms should exhaust all options to find information from consumers and brokers. And if you've documentary evidence of a policy and the lender doesn't, you can contact the firm and ask to opt in.

If not, it depends how long ago it was you took out the finance. If your car finance was active within the last six years, it should have details. If it was longer ago, it could become harder, but it should try.

Complaint already progressed further?

If you've already passed a commission-related claim to the Financial Ombudsman, or have have already received compensation from a lender, what happens next will depend on how your complaint has progressed:

• If you've already been compensated for a complaint that's covered by the redress scheme, you'll be excluded from the scheme and won't be eligible for another payout.

• If you had your complaint rejected but not taken it to the Financial Ombudsman, you should be contacted by the lender and invited to opt in.

• If your complaint was already with the Financial Ombudsman, it could have be subject to the original complaints pause to December 2025. This complaints pause has now been extended to 31 May 2026 – when the ombudsman will work through resolving existing complaints (unless the launch of the redress scheme changes the complaints pause deadline).

• If you complained on or before 16 November 2023, your provider was expected to respond as normal (so it should have dealt with your issue many months ago).

What if you don't agree with the lender's response?

Under the proposed redress scheme, if you receive a final response for a car finance firm on or after 30 January 2026 and you don't agree with the redress determination, you'll have six months to refer it to the Financial Ombudsman Service (this is free to do).

However the ombudsman will be required to consider complaints against the mass redress scheme rules. What that means in practice is:

• If you've been told you aren't owed compensation, you'll only get a different outcome from the ombudsman if it decides the firm did not follow the scheme rules (though you could still bring a court claim if you believe you've lost out).

• Once the mass redress scheme is introduced, the ombudsman will only consider complaints against the outcome you should have received under the scheme. So in simple terms – you won't be awarded more by the ombudsman; you should get the same as you would have done under the scheme.

• If the ombudsman decides that your case should have been included in the redress scheme when it was excluded, it'll likely refer the case back to the lender to be assessed as part of the scheme.

• If the ombudsman decides the lender was right to exclude you from the scheme, then it's likely that your complaint journey is over (unless you decide you want to bring a court claim).

If your complaint has been dealt with by the ombudsman, then you won't be able to resubmit your complaint to it based on the FCA's investigation outcome – unless the FCA specifically says you can. If not, you can still take your case to the courts (in which case, unless you're very legally savvy, most will need to use a claims firm. It's best to find one with its own solicitors like Bott & Co, who we've had positive feedback on around flight delay reclaims).

If your complaint has already been dealt with in the courts, then the outcome of the FCA's redress scheme won't influence the court's final decision.