Britons who suspect they were misled into car finance agreements between 2007 and 2024 may be eligible for compensation averaging around £1,400 per customer. A proposed compensation scheme by the Financial Conduct Authority (FCA) could see car buyers receiving over £8 billion in payouts. The FCA highlighted that finance divisions of banks and car manufacturers might have to pay out substantial amounts to reimburse individuals affected by undisclosed commissions from April 2007 to November 2024. These buyers were not adequately informed about the commissions paid to brokers, typically car dealers.
The estimated compensation total includes £8.2 billion, and individuals who believe they were victims of mis-sold car finance during that timeframe can reach out to Locksley Law for a complimentary agreement assessment. Financial institutions like Close Brothers, setting aside £165 million, and Santander, earmarking £295 million, are preparing for substantial payouts. Lloyds, through its Black Horse brand, has reserved £1.95 billion, and automakers such as Mercedes-Benz and BMW have allocated over £500 million each.
In light of the potentially significant compensations, we provide answers to burning questions that may arise. The car finance scandal unfolded when it was revealed that certain lenders were offering undisclosed “secret” commissions to dealerships. This practice allowed dealers to determine 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 costs.
Research by the FCA indicated that 44% of car finance agreements sold between April 2007 and November 2024 might be considered unfair due to inadequate disclosure. The regulator stated that motor finance companies violated laws by failing to disclose vital information, resulting in consumers being deprived of the opportunity to negotiate better terms and potentially paying higher loan costs.
A Court of Appeal ruling in 2024 raised concerns about substantial compensation responsibilities for lenders, with industry estimates suggesting costs could reach up to £44 billion. However, a significant portion of that judgment was overturned by the Supreme Court in August of the following year, reducing lenders’ liabilities. The FCA is now anticipated to establish the guidelines for a planned redress scheme.
Under the proposed FCA redress scheme, lenders could be mandated to pay out £8.2 billion, with some projections reaching up to £11 billion. Affected customers might receive an average compensation of approximately £700 per claim. Since its inception in October 2025, Locksley Law clients have filed more than two claims on average. According to the FCA, each claim could amount to £700, potentially resulting in an average client receiving up to £1,400 in compensation.
Individuals who believe they were victims of mis-sold car finance agreements between April 2007 and November 2024 could be eligible to file a claim. The FCA is proposing a free redress scheme expected to be launched in 2026. Participation in the scheme is voluntary, and consumers retain the option to pursue legal action through the courts. Those with HP or PCP agreements within the specified period can contact Locksley Law for a complimentary agreement check to explore potential compensation opportunities averaging £700.
For individuals choosing the FCA scheme, a template letter is available on the FCA’s website for affected drivers. The FCA website offers guidance for those suspecting mis-selling in their car, motorcycle, or van finance agreements during the relevant period. Once the scheme is operational, lenders will contact eligible customers with further instructions.