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FCA to consult on car finance compensation scheme

Victims of mis-sold car finance could receive under £950 each, following a key court ruling.

August 3, 2025 at 02:48 PM

Victims of mis-sold car finance set to get less than £950 per deal

New FCA scheme offers limited payouts for victims of mis-sold car finance deals.

Car finance victims face low compensation despite landmark ruling

The Financial Conduct Authority is set to introduce a payout scheme for victims of mis-sold car finance following a Supreme Court ruling. The scheme, however, will provide less than £950 per deal for many drivers, with the total cost projected to fall between £9 billion and £18 billion. The ruling clarified that hidden commissions from lenders to dealers on car loans were not unlawful, leaving millions of motorists unable to claim compensation. While the FCA will consult on eligibility criteria, its guidance suggests that past claims dating back to 2007 will be included. Notably, the Supreme Court's decision reversed earlier opinions on hidden commissions, reinforcing the inequalities faced by consumers in the car finance market.

Key Takeaways

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FCA plans to consult on a compensation scheme for car finance victims

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Many drivers will receive less than £950 each for mis-selling claims

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The estimated cost of the scheme could reach as high as £18 billion

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Supreme Court ruling allows hidden commissions, limiting claim eligibility

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Consumers with previous complaints do not need to reapply for compensation

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Claims likely to cover agreements made as far back as 2007.

"We anticipate requiring firms to make customers aware they may be eligible and what they may need to do."

This statement from the FCA highlights its commitment to informing consumers about their rights.

"The Supreme Court's ruling provides clarity on what constitutes an unfair relationship in car finance deals."

This reflects how legal interpretations impact consumer protection standards in the financial sector.

"Hidden commissions may not be unlawful, but they illustrate a power imbalance in the car financing process."

This opinion underscores the ethical concerns surrounding car finance practices post ruling.

The FCA's proposed compensation scheme for mis-sold car finance indicates a reactive approach in an evolving regulatory landscape. Although the payout may seem minimal, it highlights a significant shift in accountability for the industry. The decision by the Supreme Court to uphold certain commission structures, despite the unavailability of claims for many, raises concerns about consumer protection standards. With millions affected, the consultation process will determine how effectively the FCA can navigate public sentiment and restore trust in car finance providers. As the industry grapples with these changes, consumers may have to advocate for themselves amidst new regulations.