Drivers who rely on a claims management company (CMC) or law firm to pursue their car finance compensation could see their expected £829 payout slashed to just £581, the Financial Conduct Authority (FCA) has warned. That represents a £248 loss – more than 30% of the redress owed – before a single penny of compensation reaches the motorist.
The warning comes as the regulator prepares to implement a redress scheme covering an estimated 12.1 million motor finance agreements. The total cost of compensation is projected at £9.1 billion, with an average payment of £829 per eligible agreement.
How Claims Firms Eat Into Compensation
The FCA has repeatedly cautioned that using a third-party firm does not increase the chance of a successful claim, yet many customers still turn to them out of confusion. A survey commissioned by the regulator found that 27% of car finance customers did not feel confident making a complaint on their own without the help of a CMC or law firm.
Those firms typically charge a success fee or commission that can exceed 30% of the final settlement. On an £829 payout, that deduction leaves the consumer with £581. For agreements with larger redress amounts, the absolute loss would be even higher.
FCA Launches £2m Campaign to Promote Free Route
To counter this, the FCA has launched a £2 million advertising campaign running from 27 July to 6 September. The campaign directs drivers to a free template complaint letter available on the FCA's website, designed specifically for motor finance disclosure complaints.
The regulator aims to give consumers the confidence to submit a claim directly, avoiding unnecessary fees. The template letter relates to the disclosure of motor finance arrangements, a key issue at the heart of the scandal. The FCA says its online resources will remain available after the advertising campaign ends.
Scheme Suspended Amid Legal Challenges
However, the payment of compensation may not happen quickly. At the start of July, the FCA announced that its motor finance redress scheme had been partially suspended while it awaits the outcome of legal challenges scheduled for December 2026 or February next year.
If the courts overturn the scheme in whole or part, the regulator will need to decide on a revised approach. That process could trigger further legal action and extend the uncertainty. The FCA has warned that compensation could be delayed until 2028 or beyond in that scenario.
What Drivers Should Do Now
Sheree Howard, executive director at the FCA, urged motorists not to pay for help they can get for free. “Many people who may be owed compensation aren’t sure where to start or don’t realise they don’t have to pay someone to make a complaint,” she said. “Our free tools are there to help people feel claim confident - so they can get any money owed back without it costing them a penny.”
Drivers who believe they are affected should gather their motor finance paperwork, check whether their agreement is one of the 12.1 million covered, and use the FCA's free complaint template. Given the ongoing legal challenges, it may be wise to submit a claim sooner rather than later to avoid missing any deadlines once the scheme resumes.
While the advertising campaign only runs until 6 September, the FCA's online guidance and template letter remain accessible at no cost. The regulator encourages all consumers to use these tools before considering a paid claims service, as the deduction can turn a three-figure payout into a much smaller sum.
