FCA to consult on car finance compensation after Supreme Court ruling

Millions of drivers may be owed compensation – here’s what consumers should do now

The financial regulator has moved quickly to set out how it plans to get redress back to car finance customers who were ripped off. Millions of drivers who were misled by unfair commission arrangements may now have a pathway to reclaim the money they may be owed.

The announcement comes just days after the Supreme Court handed down its long-awaited ruling on Friday 1 August, finding that unfair commissions may still warrant compensation – but only in specific cases involving excessive payments or discretionary arrangements that encouraged dealers to raise interest rates.

Following the ruling, the Financial Conduct Authority (FCA) confirmed it will launch a formal consultation by early October on an industry-wide redress scheme to compensate car finance customers who were treated unfairly. If approved, the scheme could launch in 2026, with payouts starting next year.

FCA chief executive Nikhil Rathi said:

“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.

“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.”

Alex Neill, co-founder of Consumer Voice

“It’s welcome that the regulator has acted to bring clarity to consumers after the Supreme Court ruling. 

“This is a vital opportunity to restore trust and put right wrongdoing by dealers and lenders. But as ever, the devil will be in the details – the big test is whether the scheme will deliver a fair level of compensation at scale. 

“Millions of drivers placed their trust in car dealers to secure a fair deal, yet were kept in the dark about unfair commissions that inflated the cost of borrowing. Now, for the first time there is a clear path to justice.

“There will be big hurdles for the regulator to overcome including being able to engage all affected drivers and convincing consumers to trust a scheme run by the wrong-doers.”  

Sign up for updates on how consumers will be compensated. If you’ve had car finance, put yourself back in the driving seat by checking if commission was added and what type. Use our free tool to take the first step in reclaiming what’s rightfully yours.

What the FCA is proposing

The FCA says its proposed scheme will:

• Apply to car finance agreements going back to 2007
  
• Focus on discretionary and excessive commissions that were not properly disclosed
  
• Cover both discretionary and non-discretionary commission arrangements, depending on how disclosure was handled
  
• Include rules on how lenders should assess harm and calculate redress
  
• Be designed to be fair, consistent, efficient and easy to access

The FCA expects most payouts will be under £950, and the overall cost of the scheme could range from £9 billion to £18 billion, depending on its final design and take-up rate.

What consumers should do now

The FCA says people who have already complained do not need to do anything. But if you haven’t yet taken action, Consumer Voice urges you to act now.

Step 1: Contact your lender

Ask whether your car finance deal involved commission – and whether it was a discretionary arrangement where the dealer could adjust the interest rate. Use our free tool to help you ask the right questions.

Step 2: Ask how much commission was paid

The size and nature of the commission – and whether it was disclosed – will affect whether your deal qualifies for compensation.

Step 3: Sign up for updates

The FCA’s consultation will launch in early October. Sign up with Consumer Voice to get the latest as soon as it’s published.

“Put yourself back in the driving seat,” said Neill. “If you were sold car finance and paid more than you should, this is your chance to get justice.”

Why it matters: What the research shows

Between 2007 and 2021, millions of car finance customers were unknowingly charged more interest because of commission-based incentives between dealers and lenders. These practices were banned by the FCA in 2021 – but many affected consumers still haven’t been compensated.

Consumer Voice’s latest research found:

• 65% of consumers trusted their dealer to offer the best deal
  
• Only 21% knew the dealer might be earning commission
  
• 56% were only offered one deal
  
• 75% said they would have acted differently if they’d known about the commission

“The average consumer thought the dealer was making money on the car sale,” said Neill. “Not that they were incentivised to push them into a more expensive loan.”

What happens next

Here’s the FCA’s proposed timeline:

• Early October 2025 – Consultation opens
  
• 6-week consultation period – Consumer Voice will encourage consumers to share their views
  
• 2026 – Final rules in place and scheme goes live
  
• First payouts expected in 2026

The FCA has said it will work intensively in the coming weeks to finalise details. It has promised to hold lenders accountable, monitor compliance, and act where firms fall short.

Share your experience

If you’ve discovered that commission or fees were added to your car finance agreement without clear explanation, your story could help shape the final scheme.

Stay updated on car finance compensation

Consumer Voice is free to use, independent and we tell consumers when the companies they buy from have broken the law. We help people easily work out whether they’re entitled to compensation and how to claim.