Latest Updates October 2025 - millions more drivers could get compensation

31/10/25

FCA widens car finance redress scheme – millions more drivers could get compensation

The Financial Conduct Authority (FCA) has confirmed major changes to its upcoming car finance redress scheme. The scheme will now cover agreements taken out between 6 April 2007 and 1 November 2024, meaning millions more drivers could be due compensation.

The update follows months of speculation after a Supreme Court ruling earlier this year, which confirmed that many car finance customers were charged unfairly high interest rates because of hidden commissions paid to car dealers.

The background – how the problem started

For years, many car dealers and lenders used what’s called a “discretionary commission arrangement” (DCA).

Here’s how it worked:

• When you took out car finance, the dealer could adjust your interest rate.
• The higher the rate they set, the more commission they earned.
• Customers were never told this was happening.

That meant millions of people unknowingly paid hundreds or even thousands of pounds extra on their car finance – simply because their dealer had an incentive to overcharge.

The FCA banned these commission models in January 2021, but the damage had already been done.

The Johnson case – the key turning point

The situation came to a head in August 2025, when the Supreme Court ruled in favour of a consumer named Johnson.

Mr Johnson had taken out car finance that included one of these hidden commissions. The Court decided that the lender had acted unfairly by allowing the dealer to profit at the customer’s expense without being transparent.

That ruling set a binding legal precedent – meaning it applies to millions of similar cases. It effectively confirmed that many car finance agreements between 2007 and 2021 (and possibly beyond) were mis-sold.

What the FCA is now doing

Following the Supreme Court’s decision, the FCA has released a 360-page consultation paper setting out how it plans to deliver redress (compensation) to affected motorists.

The regulator now expects the scheme to include agreements from 2007 right up to November 2024, so even some post-ban finance deals could be covered.

The FCA estimates that more than 14 million car finance agreements were mis-sold. Around five million drivers could receive compensation, with an average payout of about £700 per agreement.

Clarity around high commissions

The FCA has also defined what counts as a “high commission” – when commission made up 35% of the total cost of credit or 10% of the loan value.

That’s important, because even where a discretionary commission wasn’t used, some customers were still charged excessively high commissions without proper disclosure.

What this means for consumers

• If you already complained to your lender or the Financial Ombudsman, you’re likely to get your money back sooner once the scheme starts.
• If you haven’t complained yet, you’ll still be able to make a claim under the FCA’s scheme when it opens (expected in early 2026).
• You’ll also still have the option to pursue your own legal claim if you want to try to recover more than the standard compensation amount.

While the FCA says motorists don’t have to use a claims management company or lawyer, many drivers may choose to do so to ensure their claim is handled properly and valued correctly.

The road ahead

This is one of the largest consumer compensation exercises ever seen in the UK. The FCA has made clear that it will act against firms that fail to follow the new redress rules.

For now, the key step for motorists is to find out if their car finance falls within the qualifying period.

If you took out car finance between April 2007 and November 2024, you may be owed money once the scheme goes live.

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You are not obliged to use claims management services. You may claim for free directly to those you hold responsible, or to a statutory compensation scheme or ombudsman.

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