Britons who suspect they were wrongfully sold car finance from 2007 to 2024 may potentially receive compensation averaging around £1,400 per customer. The Financial Conduct Authority (FCA) has introduced a proposed compensation scheme that could see car buyers collectively receiving over £8 billion in payouts. This initiative aims to address cases where undisclosed commissions were paid to brokers by banks and car manufacturers between April 2007 and November 2024, impacting consumers who were unaware of these arrangements.
The estimated total compensation amount includes £8.2 billion, with financial institutions like Close Brothers and Santander preparing for substantial payouts. Close Brothers has earmarked £165 million, while Santander has set aside £295 million for potential compensation costs. Notably, Lloyds, operating under the Black Horse brand, has allocated £1.95 billion for this purpose. Carmakers such as Mercedes-Benz and BMW have also reserved over £500 million each in anticipation of compensation claims, as reported by reputable sources like the BBC and the Financial Times.
The scandal in the car finance industry surfaced after revelations that dealerships received undisclosed “secret” commissions from lenders, allowing them to manipulate interest rates on finance agreements to earn higher commissions. This lack of transparency led to inflated interest charges for many consumers who unknowingly agreed to these financing terms.
The FCA’s investigation uncovered that 44% of car finance agreements sold between April 2007 and November 2024 lacked adequate disclosure, potentially rendering them unfair. The regulator stated that motor finance companies violated laws and regulations by withholding crucial information, resulting in consumers being deprived of the opportunity to negotiate better terms and potentially paying more for their loans.
Following a 2024 ruling by the Court of Appeal, lenders faced the prospect of substantial compensation liabilities, with industry estimates suggesting costs of up to £44 billion. However, a subsequent Supreme Court decision in August last year significantly reduced the liability for lenders. The FCA is now tasked with devising the rules for a forthcoming redress scheme to address these issues.
Under the proposed FCA redress scheme, lenders may be required to disburse £8.2 billion, with projections hinting at figures reaching £11 billion. Affected customers could stand to receive an average compensation of approximately £700 per claim. Locksley Law, operational since October 2025, has seen its clients average more than two claims each, potentially resulting in payouts averaging £1,400 per client, in line with FCA estimates.
Individuals who suspect they were victims of mis-sold car finance agreements between April 2007 and November 2024 may be eligible for compensation. The FCA is planning to introduce a free redress scheme in 2026 to address these grievances. While participation in the proposed scheme is voluntary, affected consumers may also opt to pursue legal recourse through the courts if they wish.
To determine eligibility for compensation, consumers with HP or PCP agreements during the specified period can contact Locksley Law for a complimentary agreement assessment. For those preferring to engage with the FCA scheme, templates and guidance are available on the FCA’s website to aid affected individuals in navigating the process. Once the redress scheme is operational, eligible customers will be contacted by lenders with instructions on the next steps.
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