Britons who suspect they were given improper car finance deals from 2007 to 2024 might be eligible for an average compensation of about £1,400 per customer. The Financial Conduct Authority (FCA) has put forth a proposed compensation scheme that could see car buyers receiving over £8 billion in payouts. The FCA revealed that banks and car manufacturers’ finance divisions could shell out billions to make amends for undisclosed commissions affecting some car buyers during the period from April 2007 to November 2024. These buyers were not fully informed about the commissions lenders paid to brokers, commonly car dealers.
The estimated sum includes £8.2 billion in compensation. If you suspect you fall into the category of those who were misled with car finance in that timeframe, you have the option to reach out to Locksley Law for a complimentary, no-obligation agreement assessment.
Financial institutions are preparing for substantial compensation payouts, with Close Brothers setting aside £165 million and Santander £295 million. Lloyds, operating the Black Horse brand and a major car finance provider, has allocated £1.95 billion for potential compensation, as reported by the BBC. Car manufacturers like Mercedes-Benz and BMW have also earmarked over £500 million each, according to the Financial Times.
In light of the possible significant payouts, we have addressed key questions that may arise. The car finance scandal came to light when it was discovered that some lenders were making undisclosed “secret” commissions to dealerships. This practice enabled dealers to dictate interest rates on finance agreements, with higher rates resulting in larger commissions for them. Consequently, many customers may have entered into finance agreements with inflated interest charges.
An investigation by the FCA found 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 and regulations by not disclosing crucial information at the time, leading to unfair outcomes where consumers were deprived of the opportunity to negotiate or secure better deals, sometimes resulting in higher loan costs.
A ruling in 2024 by the Court of Appeal raised concerns about substantial compensation obligations for lenders, with estimates suggesting potential costs reaching up to £44 billion. However, a significant portion of that judgment was overturned by the Supreme Court in August of the following year, considerably reducing lender liabilities.
Following this development, the FCA is expected to establish the guidelines for a planned redress scheme. Under the proposed FCA redress scheme, lenders could be compelled to pay out £8.2 billion, with some projections reaching as high as £11 billion. Affected customers could receive an average compensation of around £700 per claim.
Since Locksley Law’s inception in October 2025, their clients have made more than two claims on average. According to the FCA, each claim could potentially yield up to £700, translating to an average client receiving a payout of up to £1,400.
Individuals who believe they were victims of mis-sold car finance agreements between April 2007 and November 2024 may be eligible to file a claim. This encompasses Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements falling into specific categories.
The FCA is proposing a free redress scheme expected to launch in 2026 for those who believe they were affected. Participation in the scheme will be voluntary, and consumers retain the option to pursue legal action through the courts if preferred. There is no obligation to engage a law firm or claims management company to make a claim.
If you had a PCP or HP agreement between 2007 and 2024, Locksley Law can conduct a complimentary, no-obligation agreement check to determine if you could be owed an average compensation of £700. Visit www.locksleylaw.co.uk for further information.
For those opting for the FCA scheme, the regulator currently provides a template letter on its website for individuals who believe they were impacted. The FCA’s website offers guidance for those suspecting their car, motorcycle, or van finance agreements were mis-sold during the relevant period. Lenders will reach out to eligible customers with further instructions once the scheme is operational.
