Since July 2026, some people who complained to their car finance lender have received a letter explaining that their complaint is not covered by the motor finance redress scheme, or that they are not owed compensation under it. Receiving one of these letters can be confusing, particularly when the scheme is also in the news because of a legal challenge.
This guide explains why lenders are sending these letters now, the difference between the two main types of response, the most common reasons a complaint falls outside the scheme, and how to check whether the decision is right. We also cover when you can take your complaint to the Financial Ombudsman Service, which is free to use.
IN THIS GUIDE
- Why lenders are sending these letters now
- Two types of letter and what each means
- Common reasons a complaint is not covered
- How to check whether the decision is right
- Taking your complaint to the Financial Ombudsman
- If you had more than one car on finance
- Frequently asked questions
Why Lenders Are Sending Car Finance Complaint Letters Now
On 2 July 2026, the Upper Tribunal suspended parts of the scheme while four legal challenges are heard. We explain the challenge in full in our guide to what the car finance redress scheme legal challenge means for your claim.
The suspension means lenders do not currently have to calculate or pay compensation under the scheme. It does not pause everything, though. The FCA has confirmed that lenders must still respond to complainants who are not owed compensation under the scheme by the relevant scheme deadlines. MoneySavingExpert reported in July that the FCA had instructed lenders to write to some people who complained but will not be covered.
WHAT THIS MEANS IN PRACTICE
While the suspension is in place, lenders are not issuing compensation decisions under the scheme timetable. A letter you receive now is therefore more likely to explain that you are not owed compensation, or that your complaint falls outside the scheme, than to contain an offer.
Source: FCA, Motor finance scheme partially suspended, 2 July 2026.
Two Types of Lender Letter and What Each Means
The wording of your letter matters, because it affects what you can do next. Most responses fall into one of two categories.
A decision that you are not owed compensation under the scheme
This means the lender has assessed your agreement under the scheme rules and concluded that no redress is due. Under the scheme, a lender must presume an unfair relationship where a relevant commission arrangement existed and was not adequately disclosed, so a decision like this usually means the lender believes one of those conditions was not met.
According to the FCA, if you take this kind of decision to the Financial Ombudsman, the Ombudsman will assess your claim to check the scheme rules have been followed. The FCA advises contacting the Ombudsman by the date given in your lender's letter.
A final response saying your complaint falls outside the scheme
Some complaints are not handled under the scheme at all, for example because the agreement falls into an excluded category. In that case, your lender should deal with the complaint under its normal complaint rules and issue a final response letter. The Financial Ombudsman has said it will look at complaints that fall outside the scheme, or are exceptions to it, in the usual way once a final response has been issued.
Common Reasons a Car Finance Complaint Is Not Covered by the Scheme
Your letter should explain the reason for the lender's decision. These are the most common reasons, based on the published scheme rules:
- The agreement date is outside the scheme. The scheme covers regulated motor finance agreements taken out between 6 April 2007 and 1 November 2024.
- The lender says there was no relevant commission arrangement, or that it was properly disclosed. Our guide to the three types of hidden commission explains which arrangements the scheme looks at.
- The APR was among the lowest in the market. Law firm Clyde & Co notes that around 64,000 agreements with an APR in the lowest 5% offered at the time, excluding 0% deals, will not receive compensation under the scheme.
- The loan was unusually large. Loans larger than 99.5% of other loans that year are excluded from the scheme, but the FCA says these customers can still complain to their lender and the Financial Ombudsman.
- The complaint has already been resolved. People who have already had a successful Financial Ombudsman decision, had their claim decided by a court, or accepted redress are excluded from the scheme.
- The lender says the complaint is out of time. Consumers generally have six years to bring a claim, but the FCA says this may be extended where commission was deliberately concealed, and it does not expect lenders to routinely find cases out of time given how poor disclosure was.
If you took your complaint to the Financial Ombudsman before 30 March 2026 and it has not yet been decided, the Ombudsman says it is unlikely to be covered by the scheme and it will continue to investigate and give you an answer.
How to Check Whether Your Lender's Decision Is Right
Some decisions will be correct, and not everyone who had car finance is owed compensation. Checking the details carefully helps you understand whether the decision reflects your agreement.
- Read the reason and the dates. Identify which reason the lender has given and note any deadline in the letter.
- Check the facts against your paperwork. Compare the lender name, agreement start date, amount borrowed and APR with your finance agreement. If you no longer have it, you can find your finance agreement using our free tool.
- Check which agreement the letter relates to. Each finance agreement is assessed separately, so a letter about one agreement does not decide any others you may have had.
- Reply to the lender if the facts are wrong. If the letter relies on an incorrect date, amount or lender, write back with your evidence and ask the lender to review its decision.
- Consider the Financial Ombudsman if you still disagree. The next section explains how and when.
For a reminder of the criteria that usually matter, see our guide to PCP refund eligibility.
Taking a Car Finance Complaint to the Financial Ombudsman
The Financial Ombudsman Service is a free, independent service that settles complaints between consumers and financial businesses. You do not need a claims management company or a law firm to use it.
Time limits to be aware of
- For a final response letter on a complaint outside the scheme, the Financial Ombudsman's usual rule is that you have six months from the date of the letter to refer your complaint. The letter should tell you this.
- For a decision under the scheme, the FCA says you should contact the Ombudsman by the date given in your lender's letter, or the Ombudsman may not be able to help.
When the Ombudsman will not look at a complaint yet
The Financial Ombudsman stopped taking on complaints that are part of the scheme from 31 March 2026. For complaints about the scheme, it requires customers to have a decision from their lender first, unless the lender's deadline for issuing one has passed. If you contact the Ombudsman too early, it will ask you to go back to your lender.
WHAT TO INCLUDE IF YOU REFER YOUR COMPLAINT
A copy of your lender's letter, your finance agreement or its reference number, and any other correspondence about the complaint. Keep copies of everything you send.
Source: Financial Ombudsman Service, Complaints about car finance commission, 2026.
The Ombudsman is independent, so it may agree with your lender's decision as well as disagree with it.
If You Had More Than One Car on Finance
Many drivers have had several PCP or HP agreements over the years, sometimes with different lenders. Because each agreement is assessed on its own facts, a letter about one agreement tells you nothing about the others. Agreements involving a discretionary commission arrangement relate to cars financed between 2007 and 2021, when these arrangements were banned.
Our lender guides explain what to look for with some of the largest motor finance providers, including Barclays, MotoNovo, Close Brothers, Santander and Black Horse and Lloyds Banking Group.
IMPORTANT INFORMATION
This article is for general information only and does not constitute legal or financial advice. The motor finance redress scheme is subject to an ongoing legal challenge, and the rules and dates described here may change. Whether you are owed compensation depends on the details of your individual agreement, and some people will not be owed anything.
Information correct at 24 September 2026.
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