Motor Finance Scandal: UK Extends Consultation on Compensation Scheme

The UK’s financial regulator has extended its public consultation on compensation for thousands of motorists affected by the ongoing motor finance scandal, giving consumers and lenders more time to respond as the scale of potential payouts becomes clearer.

The Financial Conduct Authority (FCA) announced on Wednesday that the consultation period on the proposed compensation framework will now run for several additional weeks, reflecting both the complexity of the issue and the high public interest surrounding it. The original deadline had been set for early November, but regulators say they want to ensure that all affected parties, from car buyers to finance companies, have sufficient time to provide feedback.

At the heart of the scandal are allegations that car dealers and finance firms used unfair commission models between 2007 and 2021, allowing brokers to inflate interest rates on car loans for personal gain. The practice, known as a “discretionary commission arrangement,” led to millions of drivers paying more for vehicle financing than they should have.

Consumer advocates have described the situation as one of the largest potential financial mis-selling cases since the Payment Protection Insurance (PPI) scandal, which saw banks pay out more than £38 billion in compensation. Estimates suggest that the total cost of redress in the motor finance case could exceed £10 billion if similar patterns of misconduct are proven.

An FCA spokesperson said the regulator’s goal is to ensure “a fair, consistent, and transparent process” for handling compensation claims. “We recognise the significant impact this issue has had on consumers and the financial sector,” the spokesperson said. “By extending the consultation, we are allowing more voices to be heard and ensuring that the final framework reflects both fairness and practicality.”

The extension has been welcomed by consumer rights groups and financial experts, who argue that many drivers are still unaware they may be eligible for refunds. The FCA plans to collect additional data from affected lenders and to review the processes used by car finance intermediaries before finalising the compensation model.

Industry reaction has been mixed. Some lenders have expressed concern that a large-scale compensation programme could threaten smaller firms, while others see the extension as a necessary step to restore trust in the market. Several major finance companies, including those affiliated with leading car manufacturers, have already set aside provisions for potential repayments.

For consumers, the process remains uncertain but potentially significant. The FCA is expected to publish its final decision in early 2026, after which eligible claimants will be able to submit formal complaints or claims through regulated channels.

Experts say the outcome will shape how future commission-based financial products are regulated in the UK. As one market analyst put it, “This isn’t just about car loans ,it’s about rebuilding confidence in how financial products are sold to ordinary people.”