The five car finance factors that could mean you're still entitled to compensation despite court ruling
The Financial Conduct Authority has set out five requirements that could mean a car owner is due a payout.
About 40% of people who bought their car on finance, such as through Personal Contract Purchase (PCP) or Hire Purchase agreements, between 2007 and 2021 could be entitled to compensation, it is estimated.
This is despite the landmark Supreme Court ruling on Friday, August 1, on three drivers who bought their cars on credit.
Car finance Supreme Court ruling
In each case, the car dealer received a commission from the car finance lender, which the three claimants said was not disclosed.
In October 2024, the Court of Appeal ruled the behaviour on the three cases was unlawful, but this was overturned by the Supreme Court for two of the three cases, saying car dealers did not have a relationship with their customers that would require them to act only in the customers' interest.
One case, filed by a borrower named Marcus Johnson, was upheld because of the size of the commission the lender paid to the car dealer, and how it was disclosed. The car dealer received 55% of the value of credit as commission, without Mr Johnson's knowledge, which would have had a "material impact" on whether he took out the loan.
The Supreme Court also agreed with several of the points the FCA raised which could lead to an unfair and therefore unlawful deal between lenders and car dealers. Judges said some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA).
Car finance compensation
Following the conclusion of its industry-wide consultation in late 2025, the FCA has officially launched a formal redress scheme. The final rules, published in early 2026, mandate that lenders must now process claims under a streamlined framework. Eligible consumers who were affected by hidden discretionary commission arrangements are actively receiving compensation throughout 2026, with the first wave of payments having commenced in the spring.
The FCA said: "Our detailed review of the past use of motor finance has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers. Where consumers have lost out, they should be appropriately compensated in an orderly, consistent and efficient way.
"Some consumers have challenged their agreements with lenders through the courts. On Friday the Supreme Court ruled that in many cases commission payments could be legal, but a lender did act unfairly – and therefore unlawfully - due in part to the size of the commission it paid to the motor dealer and how it was disclosed.
"The Supreme Court agreed with several factors we had identified which could point towards an unfair relationship and fall foul of the Consumer Credit Act (CCA), whilst recognising it depends on the facts of each case."
The FCA listed five factors that could lead to a compensation claim, which the Supreme Court agreed with:
- The size of the commission relative to the charge for credit
- The nature of the commission, for example, whether it is discretionary
- The characteristics of the consumer
- Compliance with regulatory rules
- The extent and manner of disclosure
Those whose car finance loans were subject to a discretionary commission agreement are likely to be liable for compensation.
Up until January 2021, some lenders allowed brokers, such as car dealers, to increase car finance interest rates so they could take a higher commission.
This was known as a discretionary commission arrangement but was banned by the FCA in 2021 to stop incentivising brokers to increase the amount people were charged for loans.
NimbleFins previously reported 40% of car loan deals were thought to use a discretionary commission arrangement and these customers could still be entitled to compensation.
But, so could other borrowers - if you didn’t have a DCA, but your lender still paid your dealer a large or hidden commission you may still qualify, depending on the case details.
The FCA will need to decide what level of commission is deemed unfair. In Mr Johnson’s case, his dealer was given 55% commission.
Compensation, the FCA said, would depend on the "non-disclosure of the factors above and the interaction between them". Essentially, did the dealer fail to inform the consumer of any of these factors and what impact did this have?
How much car finance compensation will I receive?
Under the final 2026 rules, the FCA has confirmed that most individuals are receiving an average of £1,100 per agreement, once interest is factored in (i.e. ~£700 + 8% interest per year).
The total market payout is now estimated to sit between £12bn and £15bn. The FCA moved forward with a 'statutory' redress scheme after determining it was the most efficient way to ensure millions of motorists were repaid fairly without the need for individual court cases.
How to apply for car finance compensation
Consumers can participate in the active 2026 compensation scheme by contacting their lender directly or using the FCA's centralized online portal. The scheme has been designed to be 'user-first' and easy to navigate, specifically removing the need to use a costly claims management company (CMC) or law firm.
By simply providing your finance agreement details or vehicle registration, the lender is now required to check your eligibility and issue a final response within a set 8-week window.
NimbleFins previously reported how victims have been urged not to use claims firms as the FCA estimates they may lose out on 30% of their compensation.
To lodge a complaint and for more information, visit the FCA's dedicated web page here.
You'll need to inform your car finance provider with as much information as you can, for example your policy number, number plate and date of the agreement. You may not have all these details but try to gather as much as you can.
Once you receive acknowledgement from your provider, you can take your complaint to the Financial Ombudsman.
For those who have already lodged a complaint, they do not need to do anything else.
Car finance companies will be required to inform customers of the compensation scheme and what they need to do to make a claim.
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