Britons who suspect they were misled about car finance from 2007 to 2024 could potentially receive compensation averaging around £1,400 per customer.
A compensation plan proposed by the Financial Conduct Authority (FCA) could see car buyers collectively receiving over £8 billion in payouts. The FCA estimated that finance divisions of banks and car manufacturers might have to shell out billions to compensate certain car buyers affected by undisclosed commissions between April 2007 and November 2024. These buyers were not fully informed about the commissions that lenders paid to brokers, often car dealers.
The projected total includes £8.2 billion in compensation. If you think you might be one of those who were misled about car finance during that period, you can reach out to Locksley Law for a complimentary, no-obligation agreement check.
Banks are preparing for substantial payouts, with Close Brothers setting aside £165 million and Santander £295 million, according to reports. Lloyds, the largest car finance company under the Black Horse brand, has allocated £1.95 billion. Car manufacturers such as Mercedes-Benz and BMW have also set aside over £500 million, as per reports.
Following the disclosure of undisclosed “secret” commissions paid to dealerships by some lenders, the car finance scandal unfolded. This practice allowed dealers to determine interest rates on finance agreements, with higher rates resulting in larger commissions for them. Consequently, many customers may have agreed to finance deals with inflated interest charges.
An investigation by the FCA revealed that 44% of car finance agreements sold between April 2007 and November 2024 could be deemed unfair due to insufficient disclosure. The regulator stated that motor finance companies violated laws and regulations in place at the time by failing to disclose vital information, leading to unfairness where consumers were denied the opportunity to negotiate or seek better deals, potentially paying more for their loans.
A ruling in 2024 by the Court of Appeal raised concerns about significant compensation liabilities for lenders, with estimates suggesting costs of up to £44 billion. However, the Supreme Court overturned a substantial part of that judgment in August of the following year, reducing lender liability significantly.
In response to the ruling, the FCA is expected to establish the framework for a redress scheme. Under the proposed FCA redress scheme, lenders might have to disburse £8.2 billion, with some estimates reaching £11 billion. Affected customers could potentially receive an average compensation of about £700 per claim.
Since its establishment in October 2025, Locksley Law customers have submitted more than two claims on average. According to the FCA statement, each claim could be valued at up to £700, meaning an average client may receive a payout of up to £1,400.
Individuals who believe they were misled about a car finance agreement between April 2007 and November 2024 may be eligible to file a claim. This includes agreements falling under Hire Purchase (HP) and Personal Contract Purchase (PCP) categories.
The FCA is proposing a free redress scheme set to launch in 2026 for those who believe they were misled about car finance. Participation in the scheme will not be mandatory, and consumers may opt to pursue legal action through the courts instead. There is no obligation to make a claim through a law firm or claims management company.
If you had a PCP or HP agreement between 2007 and 2024, Locksley Law can conduct a complimentary agreement check to determine if you could be owed compensation averaging £700. Visit www.locksleylaw.co.uk for further information.
For those preferring to utilize the FCA scheme, the regulator offers a template letter on its website for affected drivers. The FCA website provides guidance for individuals who believe their car, motorcycle, or van finance agreement was misleading during the specified period. Once the scheme is operational, lenders will reach out to eligible customers with next steps.