Finance
UK watchdog examines 30 million car finance deals for compensation scheme
Published by Global Banking and Finance Review
Posted on September 9, 2025
2 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on September 9, 2025
2 min readLast updated: January 22, 2026
The UK's FCA is reviewing 30 million car finance deals for unfair terms, potentially leading to compensation. The redress could cost up to £18 billion.
LONDON (Reuters) -Britain's Financial Conduct Authority is scouring 30 million historic car finance agreements to see if consumers are eligible for compensation due to unfair loan terms, the regulator said on Tuesday.
Quizzed by lawmakers ahead of a consultation on a redress scheme, FCA CEO Nikhil Rathi said there was evidence of unfair relationships between lenders and consumers, that commissions paid were not adequately disclosed and that many consumers did not get the fairest interest rate when securing motor loans.
"During the period we are looking at from 2007 through to approximately just after 2020, there are around 30 million agreements," he told the Treasury Select Committee.
"Not all of those will be eligible for compensation," Rathi added.
The FCA has proposed a redress scheme for motorists who were sold unfair motor loans, packaged up by car dealers, and has estimated it could cost the industry between 9 billion and 18 billion pounds ($12.2 billion-24.4 billion) in compensation.
The estimated bill assuaged industry and government worries that the cost of redress could rival that of Britain's payment protection insurance mis-selling scandal, which cost lenders more than 40 billion pounds between 2011 and 2019.
British lawmakers questioned top FCA bosses after the Supreme Court in August allowed compensation for one out of three linked cases on grounds that the claimant's relationship with the lender was unfair, setting a higher bar for redress than lenders had feared.
Lenders such as Lloyds Banking Group, Close Brothers, Barclays and the UK arms of Santander and Bank of Ireland, have already set aside nearly 2 billion pounds between them to cover potential motor finance compensation claims.
The FCA, which said it was on track to publish a six-week consultation about the scope of a redress scheme from early October, hopes eligible consumers will start receiving compensation in 2026.
($1 = 0.7371 pounds)
(Reporting by Kirstin Ridley; Editing by Tommy Reggiori Wilkes and Joe Bavier)
The FCA is examining 30 million historic car finance agreements to determine if consumers are eligible for compensation due to unfair loan terms.
The FCA has estimated that the redress scheme could cost the industry between 9 billion and 18 billion pounds.
The FCA hopes that eligible consumers will start receiving compensation in 2026.
Lenders such as Lloyds Banking Group, Close Brothers, Barclays, and the UK arms of Santander and Bank of Ireland have set aside nearly 2 billion pounds for this purpose.
FCA CEO Nikhil Rathi indicated that there is evidence of unfair relationships between lenders and consumers, particularly concerning commission payments.
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