If you took out finance through a car dealership before 2021, you may have been affected by unfair lending practices. Many dealers earned hidden commissions by adding extra interest or fees, often without making this clear to the customer.
These practices are now under legal and regulatory scrutiny, following a landmark Supreme Court ruling in April 2025 and a major compensation plan proposed by the Financial Conduct Authority (FCA).
What did the Supreme Court ruling say?
In April 2025, the UK Supreme Court delivered its long-awaited judgment on a series of test cases relating to mis-sold car finance. The Court ruled that while many arrangements involving hidden commissions were not unlawful, one particular case was found to be unfair. In that case:
- The commission was unusually high
- It was not properly disclosed at the time of signing
- The consumer was left unaware of the true costs of their finance agreement
Importantly, the Supreme Court rejected arguments that car dealers owed customers a fiduciary duty or that all commission arrangements were unlawful. This limited the overall scope of potential claims.
However, the judgment confirmed that claims could succeed where the specific terms of a finance agreement made the relationship between customer, dealer, and lender fundamentally unfair.
How does the FCA’s redress scheme work?
Following the ruling, the Financial Conduct Authority announced plans for a major redress scheme to ensure affected consumers could receive compensation. The scheme is expected to cover cases where customers were misled into paying hidden or inflated commissions, particularly under Discretionary Commission Arrangements (DCAs), in which dealers could increase interest rates to earn larger commissions.
The FCA has indicated that the scheme could cost lenders between £9 billion and £18 billion. Most individual payouts are expected to be under £950 per finance agreement, with payments likely to begin in 2026. Consumers who have already lodged complaints with their bank or finance provider do not need to take further action, as their cases will be automatically reviewed under the scheme.
How do I know if I’m eligible for compensation?
Millions of motorists who bought cars on finance may have been overcharged without knowing. Even though the Supreme Court’s decision narrowed the grounds for claims, the FCA’s proposed scheme is designed to ensure that many consumers are still compensated for unfair treatment.
At the same time, consumers should be cautious. Fraudsters are already attempting to exploit the situation by offering fake compensation claims services. If you think you were mis-sold car finance, the safest route is to raise a complaint directly with your lender or seek advice from a trusted law firm.
Do I need a solicitor to get compensation?
You do not have to use a solicitor to claim compensation, but legal advice can be valuable if your case is complex. For example, some agreements involved particularly high commissions, unclear disclosures, or non-standard financial arrangements. In these situations, a solicitor can review your agreement, assess the strength of your claim, and help you decide whether to wait for the FCA scheme or pursue court action.
At Complex Law, we specialise in financial claims and consumer protection. Our team can guide you through your options and fight to ensure you receive fair compensation – on a no-win, no-fee basis. If you think you may have been affected by mis-sold car finance, try our online checker today to see if you can make a claim.
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