Millions of motorists may soon discover if they are entitled to compensation following allegations of mis-selling in car finance, as a significant Supreme Court ruling is expected this week.
In October 2024, the Court of Appeal mandated that car finance customers must be transparently informed about the commission to be paid and must consent to it. Failure to do so would render any commission payment from the lender to the dealer illegal.
The firms involved in the case, namely Close Brothers and Motonovo, challenged this decision at the Supreme Court. Should the Supreme Court affirm the Court of Appeal’s verdict, individuals who previously secured car finance deals could potentially receive compensation.
The specific amount of compensation and the recipients are still uncertain, although lenders have already set aside substantial funds in anticipation of potential payouts.
Consumer advocates, including Martin Lewis, have cautioned that policymakers might intervene to overturn the ruling. The Supreme Court will issue its judgment on Friday, August 1.
Separately, the Financial Conduct Authority (FCA) is conducting an investigation into car finance, focusing on “discretionary commission agreements” (DCAs). These agreements enabled dealers and brokers to boost their earnings by charging customers higher interest rates.
Although DCAs were banned in 2021, the FCA initiated a probe in January 2024 to assess if customers are owed compensation. The outcome of this investigation is pending the Supreme Court’s decision.
If the Court of Appeal ruling is rejected, it is probable that DCA claims will proceed through regulatory channels, as per the Martin Lewis website.
MoneySavingExpert.com has recommended that individuals who suspect they were affected should submit a complaint promptly, in case a retroactive complaints deadline is enforced. Complaints should be directed to the lender responsible for providing the car finance, not the broker or car dealership where the vehicle was obtained.
Those who were not informed about commission or may have overpaid for their car finance, or had a deal involving a DCA, could potentially qualify for compensation. MSE offers a free tool to assist with complaints regarding car finance.
Car finance lenders have until December 4, 2025, to address complaints, emphasizing the importance of submitting complaints sooner rather than later.