Fri, 01 Aug 2025

Fri, 01 Aug 2025 Car finance payouts have been limited, but lenders aren't off the hook

Lenders no longer face the prospect of having to pay £30bn to £40bn to aggrieved car buyers, but the industry still faces hefty payouts.
The Supreme Court's ruling has significantly reduced the potential compensation bill for car buyers who were misled about commission payments made by lenders to dealers. The verdict, which upheld one consumer claim, means that lenders will no longer face a £30-40bn bill. However, the industry is not off the hook as the Financial Conduct Authority may still launch a redress scheme for cases where dealers had a financial incentive to ramp up interest rates on loans. This could result in billions of pounds in compensation. The Supreme Court's ruling also provides a template for other consumer claims, and analysts predict that the bill could still be substantial, ranging from £5-13bn or more. The court's decision blocks off a potential avenue for compensation claims, but one claimant was successful, with the court deeming his finance agreement "unfair" under the Consumer Credit Act. This could open doors for other cases involving egregious commission payments. There is still uncertainty around Discretionary Commission Agreements (DCAs), which were banned by the Financial Conduct Authority in 2021. If a redress scheme is launched, millions of car buyers could still have a claim, but it's unclear how much compensation they would receive. The ruling has narrowed the number of people who will be able to reclaim car finance, according to Martin Lewis, but the £10bn bill that remains is still significant. The likelihood of government intervention with retrospective legislation has diminished significantly.
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