Britons who suspect they were wrongly sold car finance from 2007 to 2024 may be eligible for compensation averaging around £1,400 per customer. The Financial Conduct Authority (FCA) has proposed a compensation plan that could see car buyers receiving over £8 billion in payouts. The FCA revealed that banks and car manufacturers’ finance divisions 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, typically car dealers.
The estimated compensation amount includes £8.2 billion. If you think you may have been a victim of mis-sold car finance during that timeframe, Locksley Law offers a free, no-obligation agreement check.
Financial institutions are preparing for substantial payouts, with Close Brothers earmarking £165 million and Santander setting aside £295 million. Lloyds, operating the largest car finance company under its Black Horse brand, has put aside £1.95 billion. Car manufacturers like Mercedes-Benz and BMW have also allocated over £500 million each for potential compensation, according to reports.
The car finance scandal unfolded after revelations that some lenders were paying undisclosed “secret” commissions to dealerships. This practice allowed dealers to determine interest rates on finance agreements, with higher rates resulting in larger commissions. Consequently, many customers may have agreed to finance deals with inflated interest charges.
An FCA investigation found that 44% of car finance agreements sold between April 2007 and November 2024 might be deemed unfair due to insufficient disclosure. The regulator stated that motor finance companies violated laws and regulations by failing to disclose critical information, leading to unfairness for consumers who were denied the opportunity to negotiate better deals and potentially ended up paying more for their loans.
A 2024 Court of Appeal ruling raised concerns about significant compensation obligations for lenders, with industry estimates suggesting potential costs of up to £44 billion. However, much of that ruling was overturned by the Supreme Court in August of the following year, substantially reducing lender liabilities.
Following the Supreme Court’s decision, the FCA is expected to establish the rules for a proposed redress scheme. Under this scheme, lenders may have to pay out £8.2 billion, with some projections reaching as high as £11 billion. Affected customers could receive an average compensation of about £700 per claim. Since Locksley Law’s inception in October 2025, their clients have lodged more than two claims on average. Based on FCA statements, each claim could amount to £700, potentially resulting in an average client payout of up to £1,400.
Individuals who believe they were mis-sold car finance agreements between April 2007 and November 2024 may be eligible to claim compensation. This includes Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements falling into specific categories.
The FCA is proposing a free redress scheme expected to launch in 2026 for those who believe they were mis-sold car finance. Participation in the scheme will be voluntary, and consumers can opt to pursue legal action through the courts. Claimants are not obligated to use 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 potential compensation eligibility averaging £700. Visit www.locksleylaw.co.uk for further information.
For those opting for the FCA scheme, the regulator provides a template letter on its website for affected drivers. The FCA’s website offers guidance for individuals who believe their car, motorcycle, or van finance agreements were mis-sold during the relevant period. Once the scheme is operational, lenders will contact eligible customers with further instructions.
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