FCA to consult on car finance compensation after Supreme Court ruling

Millions of drivers may be owed compensation – here’s what consumers should do now

The financial regulator has moved quickly to set out how it plans to get redress back to car finance customers who were ripped off. Millions of drivers who were misled by unfair commission arrangements may now have a pathway to reclaim the money they may be owed.

The announcement comes just days after the Supreme Court handed down its long-awaited ruling on Friday 1 August, finding that unfair commissions may still warrant compensation – but only in specific cases involving excessive payments or discretionary arrangements that encouraged dealers to raise interest rates.

Following the ruling, the Financial Conduct Authority (FCA) confirmed it will launch a formal consultation by early October on an industry-wide redress scheme to compensate car finance customers who were treated unfairly. If approved, the scheme could launch in 2026, with payouts starting next year.

FCA chief executive Nikhil Rathi said:

“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.

“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.”

Alex Neill, co-founder of Consumer Voice

“It’s welcome that the regulator has acted to bring clarity to consumers after the Supreme Court ruling.

“This is a vital opportunity to restore trust and put right wrongdoing by dealers and lenders. But as ever, the devil will be in the details – the big test is whether the scheme will deliver a fair level of compensation at scale.

“Millions of drivers placed their trust in car dealers to secure a fair deal, yet were kept in the dark about unfair commissions that inflated the cost of borrowing. Now, for the first time there is a clear path to justice.

“There will be big hurdles for the regulator to overcome including being able to engage all affected drivers and convincing consumers to trust a scheme run by the wrong-doers.”

Sign up for updates on how consumers will be compensated. If you’ve had car finance, put yourself back in the driving seat by checking if commission was added and what type. Use our free tool to take the first step in reclaiming what’s rightfully yours.