Major car finance compensation update issued that affects millions of drivers

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A major update has been issued for millions of drivers who are waiting to see if they are due compensation over car finance mis-selling.

The Financial Conduct Authority (FCA) is investigating whether people were unfairly left out of pocket due to so-called “discretionary commission agreements” (DCA) which allowed brokers and car dealers to increase the interest on car finance arrangements so they’d get more commission. This type of practice was banned in 2021 but the FCA launched an investigation to establish whether people overpaid without knowing in early 2024.

But since the launch of this probe, a landmark court ruling potentially opened the door for more people who’ve taken out car finance – and not just those that included a DCA – to potentially be in line for money back. The Court of Appeal ruled customers should be clearly told how much commission would be paid, and they would need to consent to this – otherwise it would be illegal for the lender to pay any commission to the dealer.

Two lenders involved in the case, Close Brothers and FirstRand Bank, were granted permission to appeal against the ruling, and this appeal will be heard in the Supreme Court from April 1 to April 3. In an update today, the FCA confirmed it has been granted permission to intervene in the case and has filed a submission to the Supreme Court. It also reiterated that, if motor finance customers have lost out from widespread failings, that it is likely to consult on a redress scheme for compensation.

The FCA said in a statement: “We are no longer planning a further announcement in May. Instead, we will confirm within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward. The Court of Appeal case involved complaints about discretionary and non-discretionary commission arrangements (non-DCAs). Our next steps on non-DCA complaints will also be informed by the outcome of the Supreme Court case.”

Martin Lewis‘ MoneySavingExpert.com website has previously urged anyone who thinks they may have been affected to put in a complaint now, in case a cut-off date for complaints is introduced retrospectively. You should put your complaint in directly to the lender that provided the car finance – not the broker or car dealer where you got your vehicle from.

You could end up being eligible for compensation if you weren’t told about commission and may have paid too much for your car finance, or if you had a car finance deal that contained a DCA. MSE has a free car finance tool to help you complain. Car finance lenders have until December 4 to respond to complaints.