Lloyds Banking Group has already put aside £450m for potential fines, and the FCA has warned other banks to be prepared.
However, should the scope be widened to cover all car finance commission agreements, the payout bill could be much higher.
Coby Benson, a solicitor at law firm Bott and Co, said: “Extending the timeframe for complaints and broadening eligibility for both fixed and discretionary commission cases is a crucial move that will give even more consumers the chance to seek the redress they rightly deserve.”
The Finance & Leasing Association has also welcomed the plan to widen the scope to other commission complaints, calling it a “sensible move”.
The FCA said it will write to the Supreme Court asking it to make a quick decision on whether it will allow lenders to appeal last month’s crucial ruling.
The ruling wiped billions off the value of banks and forced several lenders to pause loans, with car dealerships told to urgently revise their sales practices to avoid a paralysis in the market.
Since that judgement, the FCA said it has undertaken extensive industry engagement and found that firms are likely to receive a high volume of complaints.
The watchdog said: “Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgement.
“Any complaint extension would allow them time to consider how these might be efficiently and effectively handled.
“This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market.”