Victims of the UK car finance scandal are set to receive an average payout of £830 as the Financial Conduct Authority (FCA) finalizes its compensation scheme. The regulator has tightened the rules, reducing the number of eligible contracts from 14 million to 12.1 million. The scheme covers loans agreed between 2007 and 2024 and raises the payout per contract from £700 to £830, including interest. The FCA expects around 75% of eligible consumers to claim compensation, resulting in roughly £7.5 billion being returned to borrowers. This figure is down from the £8.2 billion outlined in earlier proposals and far below the £44 billion some analysts had initially forecast. FCA chief executive Nikhil Rathi said the final terms struck a balance between fairness for consumers and proportionality for lenders. He warned that delaying payouts through legal challenges would be unfair, especially as households face rising costs. “Payouts should not be delayed any longer,” he said, adding that prompt compensation would help restore trust in the motor finance market. Banks and lenders have until 5pm on 27 April to challenge the scheme, which could slow down payouts if legal action is taken. Some lenders and the Financing and Leasing Association (FLA) have not ruled out court challenges, while claims law firms have urged consumers to take their complaints outside the FCA scheme. The FCA scheme is free to use, whereas claims management companies often charge fees up to 33% of the payout. The regulator has repeatedly warned consumers against paying for outside services, emphasizing that the official scheme is the most efficient way to secure compensation. The scheme follows the car finance scandal, in which drivers were overcharged on loans due to commission payments between lenders and car dealers. Millions of consumers are expected to receive compensation by the end of 2026 if the scheme proceeds as planned. Banks are now assessing the potential financial impact. Major lenders exposed to the scandal, such as Lloyds Banking Group, Santander, Barclays, and specialist lender Close Brothers, are closely monitoring developments. Close Brothers said it is evaluating the redress scheme and will update the market as appropriate. The government has also kept a close eye on the issue, responding to lobbying from the motor finance industry. Last year, Chancellor Rachel Reeves warned against overly large payouts and considered interventions to limit compensation. Consumer advocate Martin Lewis has encouraged drivers to submit complaints independently. He stressed that putting in a complaint online is the only way to ensure eligibility for the FCA scheme. Missing documentation or changes in personal details could prevent borrowers from being contacted by lenders, making it essential to act quickly. The FCA’s scheme aims to resolve the scandal efficiently and fairly while maintaining competitive motor finance for UK consumers. By combining broad coverage with a clear compensation formula, the regulator hopes to return billions to drivers and close a chapter on one of the UK’s most significant consumer finance controversies.