Car Finance Compensation: Millions of UK Drivers Set for Payouts in Landmark £18 Billion Scheme

Major Breakthrough in Car Finance Compensation Claims

Compensation for car finance mis-selling should start to be paid next year, with up to 14 million people likely due £100s each, as confirmed by the financial regulator. This follows a landmark Supreme Court ruling on August 1st, 2025, which opened the door for motorists to claim their share of billions in compensation payments, particularly for those who had discretionary commission arrangements (DCA) between 2007 and 2021.

The Scale of the Issue

The Financial Conduct Authority (FCA) estimates that 99% of car finance deals have a commission model, with approximately 56% having crucial ‘discretionary commission arrangements’. It is expected that lenders will pay out between £9 billion and £18 billion to consumers.

Key Developments and Timeline

The next major update is expected in October 2025, when the FCA plans to publish a consultation around a formal car finance redress scheme. The scheme will primarily focus on discretionary commission arrangements (DCAs), which are situations where brokers could adjust interest rates without informing customers, potentially leading to higher costs.

Expected Compensation and Process

Based on the FCA’s current assessments, most people would likely receive less than £950 per agreement, including some interest (around 3% per year). While this might seem modest, it could add up significantly for those with multiple agreements or loans.

Consumer Protection and Warning

Importantly, consumers don’t need to use a claims management company (CMC) or lawyer to get compensation. Many companies charge substantial fees, sometimes up to 30% of the compensation amount. The FCA or finance providers will never request upfront payments or sensitive details such as full bank passwords via email or phone. Consumers are advised to verify all communications through the FCA’s official website.

Looking Ahead

Under the redress scheme, firms will be responsible for determining whether customers have lost out due to their failings and will need to offer appropriate compensation. The FCA will establish rules that firms must follow and implement checks to ensure compliance.