Millions of Motorists Eligible for Compensation in Car Finance Mis-Selling Scandal

The UK Supreme Court is set to deliver a ruling on car loan mis-selling, potentially affecting millions of motorists who took out finance deals without fully informed consent. If the court decides the arrangements were unlawful, it could lead to a compensation scheme and billions of pounds in claims. Lenders have already set aside huge sums for potential payouts, with some reports suggesting a £44billion bill. The ruling could spark one of the largest mass redress schemes in UK history.

The UK Supreme Court is poised to deliver a significant ruling on car loan mis-selling, which could potentially impact millions of motorists who took out finance deals without fully informed consent. The decision, expected to be announced on August 1, will determine whether the arrangements were unlawful and could lead to a compensation scheme and billions of pounds in claims.

The case revolves around the payment of hidden commissions to car dealers by lenders, which were found to be unlawful by the Court of Appeal in October. The Supreme Court will decide whether to uphold this ruling, which could significantly widen the pool of potential claimants. The Financial Conduct Authority (FCA) is likely to set up a central compensation scheme for those drivers who were mis-sold loans with discretionary commission arrangements (DCAs), which were banned in 2021 [1].

The ruling could have profound economic implications. Major lenders, including Lloyds Banking Group, have already set aside substantial sums for potential payouts, with some reports suggesting a £44 billion bill. The car finance sector, which is the second biggest lender to consumers in the UK, is waiting for clarity from the Supreme Court [2].

The Supreme Court is considering three test cases, including that of Jemma Caffrey, a 42-year-old from Blackburn, who bought a car in 2009 and was later found to have paid a high interest rate. The court is also examining the case of Marcus Johnson, who bought a car in 2017 and was not informed about the commission paid to the dealer [1].

The UK Treasury has expressed concern that a large number of compensation payments could negatively affect the car market and make the UK less attractive to investors. However, Liberal Democrat MP Bobby Dean argues that good regulation can protect consumers and boost the economy [3].

The ruling is expected to have a significant impact on the car finance market and could lead to one of the largest mass redress schemes in UK history. The FCA has said it will announce whether and how it will proceed with a compensation scheme within six weeks of the judgment.

References:
[1] https://www.bbc.co.uk/news/articles/c8j1jkyjl1xo
[2] https://www.theguardian.com/business/2025/aug/01/car-finance-scandal-uk-supreme-court-poised-to-give-ruling-on-hidden-commissions
[3] https://www.reuters.com/business/finance/does-britain-face-another-multi-billion-pound-consumer-finance-scandal-2025-08-01/