One Blackburn-based law firm, Courmacs Legal, says they are now working on over two million car finance cases – but there are still thousands more cases out there
Millions of drivers across the country could be due compensation if the financial watchdog decides they were mis-sold car finance. The story has been rumbling on over the last 12 months, and a major update is set to be published within the next few weeks.
In a nutshell, the Financial Conduct Authority (FCA) is investigating whether drivers were overcharged and could be owed money back due to hidden commission payments that were made when cars were bought on finance deals. The vast majority of new cars, and many second-hand ones, are bought with finance agreements, with around two million sold this way each year. Usually, customers pay an initial deposit, then a monthly fee with interest for the vehicle.
The car loans scandal – which is being compared to the infamous Payment Protection Insurance (PPI) scandal from 2008 – is projected to cost lenders, including Santander UK, Close Brothers, Barclays and Lloyds, a collective £44billion, according to some analysts.
One Blackburn-based law firm, Courmacs Legal, says they are now working on over two million car finance cases – but there are still thousands more cases out there. Here is everything you need to know – including whether you could be eligible for a compensation payout.
What is the car finance scandal?
The Financial Conduct Authority (FCA) is currently investigating whether people were unfairly left out of pocket due to so-called “discretionary commission agreements” (DCA) which allowed brokers and car dealers to increase the interest on car finance arrangements to earn more commission. In one ombudsman case, the driver was found to have been charged an interest of 5.5% when it could have been sold at 2.49%.
The FCA banned DCAs in 2021, then in 2024, it launched an investigation to see if drivers were owed money back. Around 40% of car finance deals were believed to have DCA hidden charges. This included deals for cars, vans, camper vans and motorbikes. More specifically, the FCA is looking into cases of deals from April 2007, as this is when the Financial Ombudsman took over jurisdiction of motor finance complaints, until the end of January 2021.
The types of finance covered in the investigation are personal contract purchases (PCP) and hire purchases – it does not include personal contract hire, which is often referred to as leasing. The vehicle also had to primarily be for personal use, not business use, to potentially be eligible.
But since the launch of the probe, a separate Court of Appeal ruling has potentially opened the door for all types of car finance where there was a commission, not just DCAs, to be included in future compensation payouts. The court ruled that customers should be clearly told how much commission would be paid, and they would need to consent to this – otherwise it would be illegal for the lender to pay any commission to the dealer.
The two lenders involved in the case, Close Brothers and FirstRand Bank, were granted permission to appeal against the ruling, and this appeal will be heard in the Supreme Court from April 1 to April 3. In an update shared last week, the FCA confirmed it had been granted permission to intervene in the case and had filed a submission to the Supreme Court.
The FCA confirmed it will consult on a redress scheme and will announce the next steps for complaints within six weeks of the Supreme Court reaching its decision. If the court appeal is successful, the redress scheme could include just DCAs, or if the court rejects the appeal, it may be open to more types of car finance.
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How many people have been affected by the car loan scandal?
Tens of thousands of people are believed to have been impacted by the scandal. Courmacs Legal are now dealing with 2.2million car finance claims. To clarify the sheer number of those potentially impacted, the no win no fee firm has compiled a map which details exactly how many people in each UK constituency – alongside the average value of each claim.
The data comes from the firm’s own records from January 2025. According to the data, the constituency of Airdrie and Shotts in Scotland has the highest number of car finance claims, with the total number being 7,495 with a value of £ 17.8 million overall – this makes the average claim at around £2,379. This is followed by the fellow Scottish constituency of Hamilton and Clyde Valley, which has 7,163 claims overall. These have a value of £17million, making the average claim around £2,377.
The constituency with the highest number of claims in England is Blyth and Ashington with a total number of claims sitting at 4,736. Overall, these claims had a value of £ 10million, making the average claim £2,201 per person. In Wales, the highest number of claims came from the constituency of Rhondda and Ogmore with 5,486 claims. This totalled £11.7million making the average claim sitting at £2,136.
Which MPs support compensation payments for those affected?
Last month, Chancellor Rachel Reeves attempted to intervene in the case over concerns about the size of the compensation bill for lenders as it could undermine the competitiveness of UK banks although this attempt was blocked. At the time, a Treasury spokesperson said: “We respect the Court’s decision to not grant our application to intervene… and will monitor it closely”.
Dame Siobhain McDonagh, Labour member of the Treasury Select Committee, exclusively told the Mirror that the data from Courmacs Legal was “really shocking”. She said: “This data is really shocking in revealing just how outrageous this historic behaviour has been. It’s clear that these hardworking consumers need proper redress and that lenders and everyone involved in this need to step up and ensure they are appropriately compensated.”
In an exclusive statement to the Mirror, Bobby Dean MP, Liberal Democrat MP for Carshalton and Wallington, noted that having a car for many people was “not a luxury – but a necessity”. He said: “My mum was a cleaner and when her car broke down it meant she lost her income. Not everyone has thousands of pounds in the bank to buy a car outright, so loans are increasingly common even for second hand cars.
“The customer has to be able to trust dealers and lenders to act fairly and this scandal exposes that many just haven’t been truthful with people. Given the bad practice in the past, consumers will want assurances that lenders will in fact contact all of those entitled to any compensation due. The FCA must ensure that any scheme they propose operates in the best interests of consumers”
Darren Smith, of Courmacs Legal Ltd noted that the during the cost of living crisis, it was hard to understand why the Labour government wasn’t “on the side of the hard working” consumer, adding: “Let alone trying to protect lenders who have duped them over many years.”
“The government should be standing up for consumers, not protecting lenders who have taken them for a ride. People deserve their money back after being ripped off and they deserve it now. Motorists deserve answers and accountability. These predatory lending practices should never have happened and compensation now needs to be swiftly delivered to those who have been wronged.”
How much compensation could be paid out?
The FCA said that if the court ruled against the appeal, and concluded that motor finance customers had lost out due to “widespread failings” by lenders, then it would be “likely” it would consult on an industry-wide redress scheme. This confirmation is set to come within six week’s of the Supreme Courts ruling. The FCA’s official investigation is set to be published in May 2025.
Under such a scheme, lenders would have to follow rules to work out whether customers had lost out and, where they had, offer “appropriate compensation”. The FCA said this would be simpler for consumers than requiring them to submit a complaint themselves. It added: “We would expect fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive.”
According to the FCA, on a typical £10,000 motor finance agreement, discretionary commission arrangements could have caused customers to pay an additional £1,100 in interest over a four-year term. Consumer champion Martin Lewis says that if the compensation scheme includes all the extra interest that was charged due to the arrangement, then compensation could sit around £1,140.
However, the FCA may also set up a “fair interest rate” scheme and only refund amounts above that. The MSE founder said this would, therefore, result in a lower payout than the first method.
Martin Lewis has been campaigning on this issue over the last year and has previously urged anyone who thinks they may have been affected to put in a complaint now, in case a cut-off date for complaints is introduced retrospectively. You could be impacted if you weren’t told about commission and may have paid too much for your car finance, or if you had a car finance deal that contained a DCA.
You should put your complaint in directly to the lender that provided the car finance – not the broker or car dealer where you got your vehicle from. Martin’s Money Saving Expert (MSE) website has a free car finance tool to help you with your complaints, and car finance lenders have until December 4 to respond. However, if a redress system is put in place, then those impacted could be contacted directly.
In a statement to MSE, the FCA said: “We’d like to confirm that anyone submitting a claim won’t be ‘blacklisted’ by a company or have claims included in any product application assessments (even with linked firms).”
You should be aware that you do not need to go through a claim management firm to get this compensation. At the moment, there are plenty of adverts on social media encouraging drivers to enlist their services, and if you use one, you will have to pay them part of the payout you could receive.
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