Motorists can start receiving PCP finance refunds immediately, says FCA chief

Motorists could begin receiving compensation for PCP finance claims straight away, according to Nikhil Rathi, head of the Financial Conduct Authority (FCA). He emphasised that, now the rules have been clarified, there is effectively nothing preventing lenders from starting payouts immediately if they are ready to do so.

This follows the FCA’s redress scheme announced in late March, designed to help drivers recover money from potentially mis-sold PCP agreements taken out between April 2007 and November 2024, particularly where hidden commission structures were applied without clear customer awareness.

Under the scheme, the average compensation payout is estimated at around £829 per motorist, with up to 12 million PCP agreements potentially affected across the UK. While Rathi acknowledged that some claims could be processed and paid without delay, he also noted that, in reality, the majority of motorists are more likely to receive their refunds later this year or even into next year, depending on how quickly lenders handle the volume of claims.

PCP finance has become the dominant method of buying cars in the UK, used by roughly 90% of motorists. However, over a 17-year period, certain dealers made use of “discretionary commission arrangements” (DCAs)—a practice that has since been banned. These arrangements allowed brokers and dealers to increase the interest rates charged to customers in order to earn higher commission, often without the customer fully understanding the cost implications.

As a result, affected drivers are now able to claim compensation directly from the finance providers that issued these agreements, including Audi Finance, Black Horse, and MotoNovo Finance. The scale of potential claims means lenders are expected to face significant financial exposure as cases are processed.

Claims management companies have rapidly entered the space, offering to handle applications on behalf of motorists, typically charging fees of between 10% and 30% of any successful payout. While these services can make the process more convenient by gathering documentation and managing communication, consumers should remain cautious—particularly in light of reports of unsolicited contact such as cold calls, emails, and text messages. It is important to ensure that any firm used is authorised by the FCA, such as Claims Smart, before proceeding.

Alternatively, motorists can submit claims independently without incurring any fees. Martin Lewis of MoneySavingExpert strongly recommends this approach for those comfortable handling the process themselves, as it allows individuals to retain the full value of any compensation awarded. His platform provides clear, step-by-step instructions to guide claimants through the process efficiently.

Lewis also told The Guardian that submitting a claim as early as possible could improve both the speed and likelihood of receiving compensation. This is based on the expectation that finance providers will aim to deal with cases promptly, particularly given the potentially large number of claims. Historically, companies facing significant compensation liabilities have sometimes struggled to meet these obligations, with some entering financial difficulty or offering only a fraction of what may be owed.