Motorists across the UK could be in line for a major compensation windfall following a Supreme Court ruling and a new probe launched by the Financial Conduct Authority (FCA). At the forefront of this issue is consumer champion Martin Lewis, who has revealed key details on who may be eligible and how much individuals could expect to receive.
This emerging car finance scandal has exposed widespread mis-selling of discretionary commission arrangements between 2007 and 2021—potentially impacting millions of consumers.
What Did Martin Lewis Say About Car Finance Compensation?
Speaking to Sky News, Martin Lewis clarified that compensation payouts are likely to average “hundreds, not thousands” of pounds per deal. In some cases, individuals could receive up to £950 per car finance agreement. However, those who financed multiple vehicles could be entitled to more.
“This is about justice, not a windfall,” Lewis said, emphasizing that consumers should avoid claims management firms that charge hefty fees—sometimes up to 30%—for services that are often unnecessary. He encourages motorists to contact their car finance provider directly to check if they were affected by discretionary commission agreements.
The FCA’s Role and the Supreme Court Influence
The FCA announced a six-week consultation starting in October to explore redress options for mis-sold car finance agreements. The regulator found that many finance firms failed to comply with legal and disclosure rules during the period in question. As such, they are preparing to launch what could be one of the UK’s largest consumer compensation schemes.
Interestingly, this announcement follows a recent Supreme Court decision on a similar finance-related issue, increasing pressure on firms to settle outstanding claims swiftly and transparently. The FCA estimates the overall cost of the scheme could range between £9 billion and £18 billion, with Lloyds Bank already setting aside £1.2 billion for potential payouts.
Who Is Eligible for Car Finance Compensation?
If you purchased a car using finance—including hire purchase or personal contract purchase (PCP)—before 28 January 2021, you might be eligible for compensation. This particularly applies to cases involving discretionary commission arrangements, where brokers were incentivized to charge higher interest rates without proper disclosure.
The FCA advises that those who have already filed a complaint need not take further action. Others are encouraged to lodge complaints directly with their finance providers. If the response is unsatisfactory, consumers can escalate their case to the Financial Ombudsman Service.
How and When Will Payouts Happen?
According to Lewis, affected consumers may begin receiving compensation from 2026, depending on the final outcome of the FCA consultation. There will likely be both automatic payouts and an opt-in process for older claims where data may have been deleted.
Importantly, Lewis warns against waiting passively. “If you believe you were mis-sold, act now. Don’t lose out by delaying or giving away your compensation to middlemen,” he urged.
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