The Financial Conduct Authority (FCA) has issued an urgent warning to UK motorists about sophisticated scammers targeting car finance customers. These fraudsters are posing as legitimate lenders and offering fake compensation payouts.
Key Alert: No official compensation scheme exists yet. Any calls offering immediate payouts are scams.
What's Happening Right Now
The FCA announced plans for a potential car finance compensation scheme in August 2025. This follows a Supreme Court ruling on 1 August 2025 regarding hidden commission arrangements in motor finance deals.
Scammers are exploiting this news to target unsuspecting motorists. They're making convincing phone calls claiming to represent car finance companies or the FCA itself.
The £18 Billion Compensation Scheme Explained
Why Compensation May Be Due
Between 2007 and 2021, many car dealers received secret commission payments from finance companies. The FCA found that many firms broke their rules and didn't properly tell customers about commission arrangements.
These undisclosed payments potentially meant customers paid higher interest rates than necessary. The practice affected millions of car finance agreements across the UK.
Timeline for Legitimate Compensation
- October 2025: FCA consultation on compensation scheme details
- 2026: First legitimate compensation payments expected
- 4 December 2025: Current deadline for finance companies to respond to complaints
The FCA currently estimates that most individuals will probably receive less than £950 in compensation per agreement.
How Car Finance Scammers Operate
Common Scam Tactics
Fraudsters use these convincing approaches:
- Cold calling: Unexpected phone calls claiming you're owed money
- Fake authority: Using FCA logos, staff names, or lender branding
- Urgency pressure: Claiming offers expire soon or immediate action is needed
- Personal data harvesting: Requesting bank details, passwords, or identity documents
What Scammers Request
Scammers are calling people and offering fake compensation in exchange for personal details such as their name, address, date of birth and bank information.
They may also ask for:
- Bank account numbers and sort codes
- Online banking passwords or PINs
- Copies of driving licences or passports
- Upfront fees for "processing" claims
Red Flags: How to Spot Car Finance Scams
Immediate Warning Signs
Hang up immediately if callers:
- Offer compensation for car finance deals
- Claim to be from your finance company about payouts
- Request sensitive personal or banking information
- Pressure you to act quickly or "miss out"
Verify Legitimacy
Legitimate communications will:
- Come through official channels, you recognise
- Never request sensitive information over the phone
- Allow them time to verify their identity
- Provide verifiable contact details
The FCA never:
- Asks for money transfers or upfront fees
- Requests bank account PINs or passwords
- Uses WhatsApp or automated calling systems
- Demands immediate action or payment
Protecting Yourself from Car Finance Scams
If You Receive a Suspicious Call
- Hang up immediately - Don't engage or provide any information
- Don't call back using numbers they provide
- Verify independently by contacting companies through official channels
- Report the incident to protect others
Essential Protection Steps
Never share:
- Online banking login details
- Credit or debit card PINs
- Passwords for any accounts
- Copies of official documents via email or phone
Always verify:
- Check the caller's identity through official company websites
- Use published phone numbers, not those provided by callers
- Take time to research before taking any action
What to Do If You're Targeted
Immediate Actions
If you receive a scam call:
- End the call without providing information
- Block the number if possible
- Report scam calls and texts to Ofcom by forwarding them to 7726
If you've shared information:
- Contact your bank immediately using the numbers on your statements
- Change any passwords you may have disclosed
- Monitor your accounts for unusual activity
- Consider placing fraud alerts on your credit files
Reporting Scams
Report to appropriate authorities:
- Action Fraud: 0300 123 2040 or online
- Police Scotland: 101 (if you live in Scotland)
- FCA Consumer Helpline: 0800 111 6768
- Your bank: Use official contact details from statements
The Legitimate Car Finance Compensation Process
Who May Be Eligible
You might be entitled to compensation if you:
- Used car finance between 2007 and 2021
- Bought through a dealer rather than directly from a finance company
- We weren't told about commission arrangements
- Feel you paid higher interest rates due to undisclosed commissions
How to Make a Legitimate Claim
Current options:
- Complain directly to your original finance provider
- Wait for the official scheme launching in 2026
- Use free tools from consumer advice websites
Important: You won't need to use a claims management company (CMC) or a law firm to take part in any compensation scheme the FCA sets up.
Avoiding Claims Management Company Traps
Many companies are charging 30% fees for services you can do yourself for free. The official compensation scheme will be simpler and won't require third-party assistance.
Current Legal Position
Supreme Court Ruling Impact
On 1 August 2025, the Supreme Court ruled that in many cases, commission payments could be legal. But in certain circumstances, the failure to properly disclose commission arrangements could be unfair and therefore unlawful.
This ruling provides the legal framework for the upcoming compensation scheme. It clarifies that not all commission arrangements were problematic, but a lack of disclosure in certain circumstances was unfair.
Regulatory Response
The FCA is developing comprehensive rules for:
- Assessing valid compensation claims
- Calculating appropriate compensation amounts
- Ensuring consistent treatment across all providers
- Monitoring compliance with new requirements
Expert Advice for Car Finance Customers
Protecting Your Future
When arranging new car finance:
- Ask about all commission arrangements upfront
- Get full disclosure of costs and fees in writing
- Compare offers from multiple providers
- Read all terms and conditions carefully
Document Management
Keep records of:
- Original finance agreements and documentation
- All correspondence with finance providers
- Payment records and statements
- Any complaint correspondence
Stay Informed and Protected
Official Information Sources
Trusted sources for updates:
- FCA website (www.fca.org.uk)
- Finance provider official websites
- Consumer advice organisations like Which? and Martin Lewis
- Government consumer protection websites
Sign Up for Updates
The FCA offers email updates on car finance complaints and compensation scheme developments. This ensures you receive official information directly rather than relying on potentially fraudulent communications.
Key Takeaways
Remember these crucial points:
- No compensation scheme exists yet - Any current offers are scams
- Legitimate scheme launches in 2026 - Be patient and wait for the official process
- Never pay upfront fees - Official compensation will be free to claim
- Hang up on unexpected calls - Legitimate companies won't cold call about compensation
- Report all suspicious contact - Help protect others by reporting scams
The bottom line: If someone calls offering car finance compensation right now, it's a scam. The legitimate scheme hasn't started yet, and when it does, you won't need to pay anyone to help you claim.
This article was last updated in August 2025 with the latest FCA guidance and Supreme Court rulings. Always check official FCA sources for the most current information.
