News

Millions Could Be Owed Compensation Over Car Finance Mis-Selling

May 2025

Millions of UK drivers could be entitled to compensation following a major investigation into how car finance was sold over the past two decades. The Financial Conduct Authority (FCA) is currently reviewing historic practices in the motor finance sector, with particular focus on something called "discretionary commission arrangements" (DCAs) — a practice that was banned in 2021.

What Were Discretionary Commission Arrangements?

Before January 28, 2021, car dealers and brokers were often allowed to set the interest rates for car finance agreements. The higher the interest rate, the more commission they earned. This gave them a strong incentive to push up rates, and many customers were unaware that their interest rate had been inflated purely to increase someone else’s commission.

Why Is This Being Investigated Now?

A landmark Court of Appeal ruling in October 2024 found that failing to disclose these commission arrangements was unlawful. The case has now gone to the Supreme Court, with a final decision expected in April 2025. In the meantime, the FCA has paused many individual complaints so it can assess the situation more broadly. If the Supreme Court upholds the original ruling, the FCA is likely to propose a full-scale redress scheme — meaning affected customers could be compensated without needing to take individual legal action.

How Much Could People Get?

Estimates suggest that average payouts could be around £1,100, with the total industry liability potentially reaching £16 billion. Major lenders like Lloyds, Barclays, and Santander could be among those required to pay out if the scheme goes ahead.

Stay Informed

This is shaping up to be one of the biggest financial redress stories in years. Whether you’re still paying off a car, or finished years ago, it’s worth checking if you were affected. The Supreme Court’s decision is expected soon — and if compensation is on the table, you’ll want to be ready.

What Should I Do If I Had Car Finance?

If you took out car finance before January 2021 — especially via a Personal Contract Purchase (PCP) or Hire Purchase (HP) deal — you might have been affected. You can:

Contact your finance provider to ask whether a discretionary commission was involved in your agreement.
Lodge a complaint if you believe the interest rate was unfairly inflated.
Keep records of any paperwork or contracts you still have.

Even if you're not sure, it’s worth enquiring. If a redress scheme is introduced, companies could be required to contact eligible customers directly — but starting the process yourself might help speed things up.

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Key Deadlines to Know

The FCA has extended the deadline for lenders to respond to these complaints until 4 December 2025. After that, if you’re not satisfied with the outcome, you’ll have until 29 July 2026 — or 15 months from the lender’s final response (whichever is later) — to escalate your case to the Financial Ombudsman.