How can I claim car finance compensation and what does today’s Supreme Court ruling mean?
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MILLIONS of drivers could still get compensation despite the Supreme Court’s decision to overturn the landmark car finance mis-selling case.
A crunch ruling by the Supreme Court today looked at whether £44billion worth of cash should be handed out by motor finance providers as compensation for undisclosed broker commission arrangements.
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What happened today?
The Supreme Court – the UK’s highest court – considered an appeal against a Court of Appeal ruling made in October last year, which was about three individuals who each bought a car on credit.
In each case, the dealer made a profit on the sale of the car but also received commission for introducing the business to them – which the three people claimed they did not know about.
The Court of Appeal ruled in October that the firms broke the law by not telling borrowers about ‘secret’ commission payments.
The lenders, FirstRand Bank and Close Brothers, are challenging the decision.
These were known as “commission disclosure complaints” and could apply up to 99% of car finance loans.
In its judgment, the Supreme Court rejected the claims for two of the three cases and upheld the lender’s appeals.
It means that compensation payments may not be as big as previously expected, but some drivers could still be in line for cash.
Why is it important?
The ruling would have had much wider ramifications for the industry and the financial services sector if it had been upheld.
It means lenders, including Barclays, Lloyds, Santander and Close Brothers will not pay out nearly as much as had been feared compensation – with it estimated to be just £20billion instead of £44billion.
The ruling today decided whether drivers can be compensated and also the scale of potential compensation claims.
What happens next will be overseen by the Financial Conduct Authority (FCA).
The FCA previously said if there was widespread harm to consumers then it could set up an industry-wide redress scheme.
It said it will confirm within six weeks of the Supreme Court judgement whether it is planning to launch such a scheme.
If the court sides with lenders then it will significantly limit the scope of potential payouts to motorists.
What happens now?
MILLIONS of drivers will still be in line for compensation despite today’s landmark judgement – but the payouts will be lower and not as many people will qualify for them.
Despite today’s judgement banks will still be responsible for any claims relating to discretionary commission arrangements (DCAs).
This is where drivers were charged excessive interest – and the higher they were the more commission they earned.
Those applied to around 40% of car finance deals.
Drivers will now have wait for the city watchdog to reveal whether it plans to launch a redress scheme.
The watchdog is considering whether it should be an opt-in or opt-out scheme and how much interest should be paid on payments.
The Financial Conduct Authority has previously said that it will reveal plans within six weeks of the Supreme Court judgement.
The amount of compensation will be lower – around £20billion, instead of £44billion if the Court of Appeal decision had been upheld.
How can I still get compensation?
The FCA is still looking at compensation for potential mis-selling of some types of motor finance arrangements, known as discretionary commission arrangements (DCAs).
These apply to 40% of car finance deals, where brokers and dealers could increase the amount of interest they charged customers without telling them. If they did, they got increased commission.
This could still go ahead regardless.
The ruling still leaves the possibility open for millions of drivers to seek compensation for a different car finance practice.
The FCA has been considering a financial redress scheme for drivers over PCP and hire purchase agreements made since before 2021.
This claims relate to so-called discretionary commission arrangements (DCAs), which applied to 40% of car finance deals.
It is where brokers and dealers could increase the amount of interest they charge without telling them. If they did, they got increased commission.
The Supreme Court ruling had put these claims on hold – but now the FCA is set to reveal within six weeks whether it will launch an industry wide compensation scheme.
It is deciding whether this scheme will involve automatic compensation refunds or whether drivers will have to “opt-in”. It is also looking at the interest rates for compensation payments.
Claims management companies have already been advertising services to help motorists demand compensation, but the FCA is urging borrowers to put in a claim directly with their lender to prevent any unnecessary fees.
How to claim
If you think you should be compensated, consumer finance website MoneySavingExpert.com has a free email template to help you complain to your finance provider.
You can also complain directly to your provider without using the template.
Anyone who took out car finance should file a claim, even if their previous one was denied.
In your complaint, ask whether you were overcharged due to your broker receiving a commission and ask the company to rectify this if it happened.
If you are not happy with the company’s response then you can escalate your complaint to the Financial Ombudsman Service for free.
You have until July 29, 2026, or up to 15 months from the date of the company’s final response letter to do so, whichever is longer.
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