Car finance mis-selling case: Everything you need to know
THE car finance mis-selling scandal is everywhere, with motorists queuing up to claim a share of what could be billions of pounds in compensation.
It’s claimed that dodgy car dealers were pocketing extra cash from high-interest car loans, leaving drivers worse off.
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There’s an upcoming court case that will put this to the test. If successful, anyone with a car finance agreement signed between 2007 and 28 January 2021 could make a claim.
Could you be in line for some car loan compensation cash?
In this in-depth article, will explain what the car finance misselling scandal is and why it matters to you. We’ll also show you how you can register a claim through trusted provider .
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What is the car finance mis-selling case about?
The majority of cars sold in the UK are bought with finance agreements. These loans enable drivers to pay a deposit and then spread the cost of a new vehicle over several years.
It was discovered that car dealers, acting as loan brokers, earned a commission based on the interest rate charged to the buyer for Personal Contract Purchase (PCP) and Hire Purchase agreements. These cover about 40% of all car finance agreements.
The higher the interest rate charged to the consumer, the more commission the dealer made.
Basically, car dealers were incentivised to make loan agreements with higher interest rates.
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The practice, known as discretionary commission arrangements (DCAs), has left many drivers paying hundreds and even thousands of pounds more for their vehicles.
The practice was banned by the UK’s money regulator, the Financial Conduct Authority (FCA) in 2021.
The FCA is also exploring where mis-selling took place on non-discretionary finance agreements, where car dealers didn’t set the interest rates. It’s less likely (but not out of the question) that these loans will also be part of this mis-selling scandal.
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Car finance mis-selling - the timeline
Here’s a basic timeline of the .
- Problem found (2019): The FCA found some car dealers were making more money by charging people higher interest rates for loans.
- New rules (2020): The FCA officially banned Discretionary Commission Arrangement (DCA), where dealers chose the interest rate to get more commission.
- Changes start (2021): The ban came into force, which could save drivers money – around £165 million a year.
- More rules (2023): A new rule called Consumer Duty came in, making sure companies put customers first. By the end of the year, over 10,000 people had complained about how commission was handled when they bought a car.
- Pause and review (2024): The FCA paused complaint handling so it could properly look into how car finance was sold, and whether people deserve money back.
- Court cases begin: Some companies challenged decisions in an attempt to block compensation.
- Court of Appeal ruling (Oct 2024): The Court of Appeal made a judgment in the Test Cases, finding that it was unlawful for car dealers to receive a commission from loan agreements unless customers were made aware of this. This opens the door for compensation claims from millions of motorists.
- What’s next?: The FCA says it might bring in a refund scheme (called the ). A final decision will come six weeks after the Supreme Court rules on the case.
How do I know if I’ve been affected?
If you’re wondering if all this applies to you, here’s how to find out.
If you bought a car on finance between 2007-2021, you could have a claim.
The easiest and quickest way to check if you’re eligible to apply for compensation is to join one of the group claims against lenders.
is one of the leading Claim Management firms representing thousands of drivers on a no-win, no-fee basis.
Which firms are involved?
The initial mis-selling scandal emerged after the FCA began investigating Barclays, says .
Some of the companies caught up in the finance scandal include high-street giants Lloyds, Santander and Barclays as well as Close Brothers.
Don’t worry if you don’t know or can’t remember who provides your car loan, can do all this for you.
What is the average payout for a mis-sold car finance refund?
The finance sector is taking this very seriously, with estimates for the total cost of compensation an eye-watering £16bn, says Which?.
The massive figures represent the fact that DCAs were in place for almost 15 years, and could cover millions of loans.
The situation is changing and there are several possible outcomes.
If the Supreme Court sides with borrowers, the average compensation should be around £1,000.
However, the precise amount depends on the amount of money borrowed and interest rates, so some could expect much higher payouts.
Compensation could be paid on any loan agreement that has been mis-sold.
This means you may be able to make multiple claims if you have owned cars and paid loans during this period.
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When will the Supreme Court make a decision?
The Supreme Court is expected to make a decision on the car finance mis-selling scandal at some point in 2025. We can’t be more precise than that at the moment.
Don’t worry, you won’t miss the announcement. This is likely to be big news for the public (and potentially bad news for the banks)
Is it worth putting in a complaint now?
Yes, it’s important that you register your claim as soon as possible. The sooner you get your claim in, the quicker you could get any compensation that you are due.
The good news is that registering your claim is simple and takes a few minutes.
How do I complain?
If you think you’ve been mis-sold car finance, the first step is to contact the company that gave you the finance. If you're not happy with their final reply, you can take your complaint to the .
But be aware: you might have to wait a while for that reply. Because of the sheer number of claims, the FCA says companies no longer need to respond within eight weeks.
Now, finance companies don’t have to reply to complaints about commission until 4 December 2025.
If you’re unhappy with the response, or you don’t receive one, you’ll also get more time to take your complaint to the FOS. Normally, you’d have six months after getting a final response. For these complaints, you’ll now have 15 months, or until 29 July 2026, whichever is later.
As we’ve explained above, you can do this all yourself if you’ve got the time and the
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will ask for some details about you, your name, current address and any previous addresses. This will kick off the claim process. You’ll then be contacted with information on eligibility and how you can join
Check if you could claim for mis-sold car finance below