Britons who suspect they were sold car finance under false pretenses from 2007 to 2024 may be eligible for compensation averaging around £1,400 per customer. The Financial Conduct Authority (FCA) has proposed a compensation scheme that could see car buyers receive over £8 billion in payouts. The FCA estimates that banks and car manufacturers’ finance divisions may have to pay out billions to reimburse customers affected by undisclosed commissions between April 2007 and November 2024. These customers were not adequately informed about the commissions paid to brokers, usually car dealers.
The projected compensation sum includes £8.2 billion, and individuals who believe they were victims of mis-sold car finance during this period can reach out to Locksley Law for a complimentary agreement check. Financial institutions like Close Brothers and Santander are preparing for substantial payouts, with Close Brothers setting aside £165 million and Santander earmarking £295 million. Lloyds, operating through its Black Horse brand, has allocated £1.95 billion for potential compensation, as reported by the BBC. Car manufacturers such as Mercedes-Benz and BMW have also reserved over £500 million each, according to the Financial Times.
The car finance scandal emerged when it was discovered that certain lenders were paying undisclosed commissions to dealerships, allowing dealers to manipulate finance agreement interest rates to earn higher commissions. As a result, many customers may have unknowingly agreed to finance deals with inflated interest charges. An FCA investigation revealed that 44% of car finance agreements sold between April 2007 and November 2024 lacked sufficient disclosure, potentially rendering them unfair. The FCA stated that motor finance companies violated laws and regulations by withholding crucial information, resulting in consumers being disadvantaged in negotiating better deals and possibly paying more for their loans.
A 2024 Court of Appeal ruling raised concerns about significant compensation obligations for lenders, with industry estimates suggesting potential costs of up to £44 billion. However, most of this judgment was overturned by the Supreme Court in August of the following year, substantially reducing lender liabilities. The FCA is now expected to formulate the rules for a proposed redress scheme.
Under the planned FCA redress scheme, lenders may have to disburse £8.2 billion in compensation, with some projections reaching as high as £11 billion. Affected customers could receive an average compensation of approximately £700 per claim. Since Locksley Law’s launch in October 2025, their clients have submitted more than two claims on average. With each claim potentially valued at up to £700, an average client may receive a payout of up to £1,400.
Individuals who believe they were improperly sold a car finance agreement between April 2007 and November 2024 may be eligible to file a claim. The FCA is proposing a free redress scheme expected to be introduced in 2026, although participation in the scheme is not mandatory. Consumers retain the option to pursue legal recourse through the courts if they prefer. For those who had a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement during the specified period, Locksley Law can conduct a complimentary agreement check to assess potential compensation eligibility averaging £700. Visit www.locksleylaw.co.uk for further information.
For those opting to use the FCA scheme, the regulator provides a template letter on its website for affected individuals to use. The FCA website offers guidance for those who believe their car, motorcycle, or van finance agreement was mis-sold within the relevant timeframe. Once the scheme is operational, lenders will communicate with eligible customers regarding the next steps.
