UK Car Finance Scandal: Supreme Court Ruling Could Lead to Billions in Claims — Are You Eligible?

A landmark Supreme Court decision scheduled for Friday could trigger Britain's largest-ever financial compensation scandal, potentially dwarfing the infamous PPI mis-selling case that cost banks over £38 billion.

The ruling addresses whether lenders and brokers must secure fully informed consent from customers for commission payments, potentially reshaping the £40 billion ($52 billion) motor finance market. With banks like Lloyds and Santander setting aside £1.445 billion ($2 billion) for claims, the decision could rival the PPI scandal in scale.

Motorists who financed vehicles before 28 January 2021 may be eligible for payouts, but government intervention looms as a possible barrier to compensation.

The Car Finance Scandal Explained

The controversy centres on discretionary commission arrangements (DCAs), banned by the Financial Conduct Authority (FCA) in 2021, where dealers could increase interest rates to earn higher commissions without informing customers.

A Court of Appeal ruling on 25 October 2024 expanded the scope, declaring all undisclosed commissions unlawful, prompting lenders like Close Brothers and FirstRand Bank to appeal to the Supreme Court.

The FCA reported that over 80% of new cars are bought on finance, with 2.5 million complaints filed since January 2024. 'Millions trusted their dealer for a fair deal, but were sold loans without knowing the dealer stood to gain,' said Alex Neill of Consumer Voice.

The ruling could extend to non-DCA agreements, potentially affecting millions more.

Implications of the Supreme Court Ruling

The Friday's Supreme Court decision, addressing appeals in cases like Hopcraft v Close Brothers, will clarify whether dealers owe a fiduciary duty to customers and if lenders are liable for secret commissions.

If upheld, the FCA may launch a redress scheme by mid-September 2025, with payouts estimated to be £1,000 ($1,340) to £3,000 ($4,020) per claimant, although some may exceed £10,000 ($13,400) for high-value loans.

Lenders have braced for impact, with Lloyds reserving £1.15 billion ($1.54 billion) and Santander £290 million ($388.6 million).

However, X posts from @thatginamiller on 27 July 2025 warn, 'There is a story that is not getting enough coverage in my view. Car finance companies were paying huge commissions to brokers that customers were not aware of. #carloanscandal.'

The FCA aims to strike a balance between consumer justice and market stability, warning against using claims firms that charge up to 36% of payouts.

Check Your Eligibility Before Time Runs Out

Motorists who financed a car, van, or motorbike via Personal Contract Purchase (PCP) or Hire Purchase (HP) between April 2007 and 28 January 2021 may qualify, particularly if commissions were not disclosed.

The FCA advises checking agreements for hidden commissions and using free tools, such as the MoneySavingExpert reclaim guide. However, concerns persist about missing records, as banks often delete data older than six years.

A social media post by @premnsikka highlighted: 'UK Supreme Court judges reject Reeves' motor finance intervention. Banks face a possible £44bn compensation bill for mis-selling car loans.'

Chancellor Rachel Reeves' consideration of retrospective legislation to limit payouts has sparked debate, with critics arguing it undermines judicial independence.

Consumers are urged to act before the FCA's December 2025 deadline for complaints. For those unsure where to start, contacting lenders directly or visiting the FCA's website offers a straightforward path to check eligibility.

The process may seem daunting, but with millions potentially affected, taking action now could secure significant compensation. Even if records are missing, free resources and upcoming FCA guidance may simplify claims, ensuring consumers aren't left out of pocket.