Britons who suspect they were sold car finance under misleading terms between 2007 and 2024 could potentially receive compensation averaging around £1,400 per customer. The Financial Conduct Authority (FCA) has proposed a scheme that could see car buyers collectively receiving over £8 billion in payouts. The FCA’s estimates suggest that financial institutions and car manufacturers may need to pay out billions to redress some car buyers affected by undisclosed commissions during the period from April 2007 to November 2024. These buyers were not adequately informed about the commissions paid by lenders to brokers, typically car dealers.
The projected amount includes an estimated £8.2 billion earmarked for compensation. If you suspect you might be one of the individuals who were mis-sold car finance during this timeframe, you have the option to reach out to Locksley Law for a complimentary agreement check without any obligations.
Major banks are preparing for substantial payouts, with Close Brothers having set aside £165 million and Santander £295 million for potential compensation costs. Lloyds, a prominent car finance provider under its Black Horse brand, has reserved £1.95 billion for such purposes, as reported by the BBC. Carmakers like Mercedes-Benz and BMW have also allocated over £500 million each, according to the Financial Times.
In response to the looming significant payouts, we have addressed common questions that may arise. The car finance scandal came to light when it was revealed that certain lenders were making undisclosed “secret” commissions to dealerships. This practice allowed dealers to manipulate interest rates on finance agreements, with higher rates resulting in larger commissions. Consequently, many customers may have unknowingly agreed to finance deals with inflated interest charges.
An investigation by the FCA uncovered that 44% of car finance agreements sold between April 2007 and November 2024 could be deemed unfair due to inadequate disclosure. The regulator stated that motor finance companies violated existing laws and regulations by failing to disclose crucial information, leading to unfairness where consumers were deprived of the opportunity to negotiate or secure better deals, ultimately resulting in higher loan costs.
A 2024 Court of Appeal ruling raised concerns about substantial compensation obligations for lenders, with industry estimates suggesting potential liabilities reaching up to £44 billion. However, the Supreme Court’s decision in August of the following year significantly reduced lenders’ liability.
Following this ruling, the FCA is expected to establish the guidelines for a forthcoming redress scheme. This proposed scheme could require lenders to pay out £8.2 billion, with some projections going as high as £11 billion. Affected customers may stand to receive an average compensation of approximately £700 per claim. Since Locksley Law commenced operations in October 2025, their clients have filed an average of over two claims each. With each claim potentially amounting to £700, the average customer could receive a payout of up to £1,400.
Individuals who believe they were the victims of mis-sold car finance agreements between April 2007 and November 2024 may be eligible to make a claim, encompassing Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements falling within specific categories.
If you suspect you were mis-sold car finance during the mentioned period, the FCA is proposing a no-cost redress scheme anticipated to launch in 2026. Participation in this scheme will not be compulsory, as consumers retain the option to pursue legal recourse through the courts. There is no obligation to seek redress through a law firm or claims management company.
For those inclined towards the FCA scheme, the regulator currently provides a template letter on its website for individuals believing they were affected. The FCA’s website offers guidance for those who suspect their car, motorbike, or van finance agreements were mis-sold within the relevant period. Once the scheme is operational, eligible customers will be contacted by lenders with further instructions.
