Regulator says 14 million people likely to get £100s each in car finance mis-selling payouts

Giving evidence to a cross-party group of MPs today (Tuesday 9 September), industry regulator the Financial Conduct Authority (FCA) said it would set out details of its compensation scheme "soon". And it once again warned against signing up with a claims management firm or a law firm which "may take up to 30% of any compensation you are due".

Key updates from the regulator's evidence to Parliament

The FCA panel, which included its chief executive, Nikhil Rathi, told MPs in the Treasury Committee:

• 14 million people are likely due compensation. From 2007 to 2020, some 14.6 million car finance agreements had discretionary commission arrangements. A "very significant proportion" of these are likely to be eligible for redress.
  
  A "smaller number" of car finance agreements with very high commission that wasn't properly disclosed to consumers could also be eligible.

• The average compensation due will probably be in the £100s, not £1,000s. Some claims firms and law firms had argued that the FCA's initial estimates were too low. The FCA said it stood by its figures, adding that it would consult openly and that it was important for communications from claims firms to consumers to be "clear and accurate". The FCA said it had taken action against 171 misleading promotions by claims firms since the start of August.

• The crucial consultation on a redress scheme is "on track" to be published in early October. But the FCA couldn't give a precise date.

• Payouts are expected to start next year. However, this is subject to the outcome of the consultation. The FCA also raised the possibility of a legal challenge against its redress scheme by car finance firms, which could delay things. But the FCA stressed that its aim was to be fair and proportionate – hopefully reducing the risk.

• Car finance firms won't be able to rely on a lack of data to avoid paying out. "Where a firm says to us they don't have the data, we're not just going to take that at face value. We will look at it very forensically," said Mr Rathi. But he added that "a very large number of firms" have been cooperative and working on practical solutions.

If you haven't already, you may want to put in a DIY complaint now

If you've already complained, there's little need to do anything. Otherwise, the regulator's official advice is: "If you are concerned, you should contact your lender and complain now".

You can use our FREE complaint tool to do just that. As MoneySavingExpert.com founder Martin Lewis has previously said, this may be particularly beneficial in old cases where you have the details of your car finance but the car finance firm may have deleted it – as this way, you put a marker in that you want your case looked at.

There are TWO types of car finance mis-selling being looked at

There are two types of car finance mis-selling being looked at by the FCA:

1. Discretionary Commission Arrangements (DCAs). This is the type of car finance mis-selling that Martin has been talking about. In January 2024, the FCA launched an investigation into DCAs by car finance firms, with a view that there was a likelihood of systemic potential mis-selling.
   
   This WASN'T what the huge recent Supreme Court case covered, but even so, the DCA route was put on hold in case something came up in court that affected it. Nothing substantial did. So, last month, the regulator announced a consultation into a mass redress scheme.
   
   A DCA is where the interest rate you were charged was variable, so it could be increased in order for the broker or dealer to get more commission, hence discretionary commission.
   
   DCAs were banned in January 2021, but if you got Hire Purchase or Personal Contract Purchase (PCP) car finance before then, around half had a DCA in place. If yours did, and you weren't informed (almost no one was), the regulator thinks you may've been mis-sold and could be due £100s back.

2. The Supreme Court 'unfair commission' cases. These are based on the Supreme Court's August 2025 ruling in one of the three test cases it had to decide on. The specifics in this case were that over 55% of the cost of credit was paid to the car dealer as a commission.
   
   The Supreme Court said that this huge proportion, combined with the fact the dealer's brochure made it look like it'd worked with a panel of finance firms, which in practice it hadn't, made it unfair.
   
   The court then said 'unfair commission' was complex, so it would need deciding on a case-by-case basis. It suggested other relevant factors to be taken into account, as well as the proportion and type of commission and the disclosure, included whether lenders complied with rules and the nature of the customer (for example, vulnerable customers).
   
   As unfair commission cases are new, Martin has previously said he hopes these will be clarified by and included in the regulator's mass redress scheme.