Updated: 05 August 2025
Originally Published: 31 July 2025
A growing number of UK motorists are now coming forward with car finance claims, highlighting what could become one of the largest financial redress schemes in recent history.
In January, the FCA announced it would launch a review into historic motor finance agreements, specifically those involving discretionary commission arrangements (DCAs). Such agreements, common from 2007 to 2021, involved brokers and dealers altering a customer's interest rate and being paid higher commission in exchange for the privilege, sometimes without a customer's informed consent.
The issue has now progressed significantly. The Supreme Court issued its landmark judgement on 1 August 2025 [1]. The Court (by a five‑judge panel) dismissed two of the three test claims, finding that lenders are not automatically liable for undisclosed commissions and that car dealers do not owe a fiduciary duty to purchasers. The claimant (Marcus Johnson) was only found to have been treated unfairly in one very specific case under the Consumer Credit Act.
Following this, the Financial Conduct Authority (FCA) has confirmed it will be consulting in early October 2025 [2] on an industry‑wide redress scheme which will target discretionary commission arrangements (DCAs) and potentially other unfair practices. Compensation payments are expected to begin in 2026, with the average payment per agreement being around £950 [3].
Claims management companies and law firms have reported a "marked increase" in enquiries from affected motorists, many of whom are customers who entered into Personal Contract Purchase (PCP) deals. The influx of PCP claims has fuelled the view that "potentially millions" of motorists were overcharged on interest payments as broker incentives were not transparent. Lenders could face a financial and reputational hit running into billions of pounds.
Some banks have started to set aside provisions - Lloyds Banking Group [4] (owners of Black Horse Finance) for example. But many others are still staying quiet and "awaiting guidance" from the regulators. The criticism of this slow approach is that it is only serving to further infuriate and upset consumers, who feel that they have been misled or put out of pocket.
Uncertainty is being met by calls from lawyers for people to look back over old finance deals and check if they might have fallen to unfair commissions. Motorists need not to wait for a ruling to challenge agreements and make car finance claims with trusted firms like Reclaim247 to see if they can claim redress.
The potential fallout from this car finance scandal is wide-reaching. Beyond immediate financial compensation, the case is expected to reshape industry practices, with calls for more transparency in how car loans and PCP agreements are sold. Affected motorists who believe they may have been mis-sold an agreement can find detailed information on what the scandal involves at this guide on the car finance scandal.
As the spotlight intensifies, the message is clear: drivers are urged to act now, while those who have already submitted claims do not need to take further action.
The true scale of the issue and the number of people entitled to compensation may only become clear once the full investigation is concluded.
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References:
- Supreme Court issued its landmark judgment on 1 August 2025 - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
- FCA will be consulting in early October 2025 - https://www.fca.org.uk/news/statements/fca-reaction-supreme-court-motor-finance-judgment
- average payment per agreement being around £950 - https://www.birminghammail.co.uk/motoring/motoring-news/14-million-drivers-could-receive-32193839
- Lloyds Banking Group sets aside provisions - https://www.reuters.com/business/finance/lloyds-keeps-motor-finance-provision-under-review-after-supreme-court-ruling-2025-08-04/