**Motorists May Still Receive Compensation of Up to £950 Following Supreme Court Decision**
Motorists across the UK who purchased vehicles on finance could still be in line for compensation, despite a recent Supreme Court judgement which some thought may have closed the door on pay-outs. The Financial Conduct Authority (FCA) confirmed over the weekend that it would explore an industry-wide scheme to address potential cases of mis-sold motor finance agreements—a move which could see thousands of individuals receive redress.
The Supreme Court ruling, delivered on Friday, focused specifically on the nature of the relationship between car dealers and their customers. The court determined that there was no legal obligation for dealers to act in a wholly selfless, ‘altruistic’ manner towards buyers when arranging finance. However, while many commission-based arrangements between lenders and dealers were deemed permissible, the FCA highlighted that in some instances, the lack of transparency around these commissions may have crossed a legal line.
According to statements from the FCA, a significant number of motor finance companies and dealerships failed to inform customers adequately about the commissions paid by lenders to dealers at the point of sale. This lack of disclosure, the regulator indicated, could render some agreements unfair, entitling customers to compensation.
Nikhil Rathi, chief executive of the FCA, commented on the ruling: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”
Rathi went on to reassure affected motorists: “Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get. It will take time to establish a scheme, but we hope to start getting people any money they are owed next year.”
The FCA’s preliminary estimates suggest that the majority of eligible customers will receive less than £950 each. However, given the scale of motor finance arrangements in the UK, the overall cost of the proposed compensation scheme could be considerable, with estimates ranging from £9 billion to £18 billion.
As the FCA emphasised, the consultation on how the redress scheme should work is expected to be launched by early October. Should the scheme be approved following public consultation and industry feedback, payments could commence in 2026.
This announcement follows growing criticism in recent years over the way motor finance products have been sold to consumers. Some industry observers have pointed to longstanding confusion and lack of clarity around how dealers were incentivised by lenders—a situation that the Supreme Court now acknowledges could have led to unfair treatment in certain cases.
Consumer groups have largely welcomed the FCA’s intervention, though they stress the importance of ensuring all affected motorists are aware of their potential eligibility, and are able to claim compensation without unnecessary complexity. On the other hand, the motor finance industry itself faces a period of uncertainty as the full implications of the proposed scheme become clearer over the coming months.
The FCA has advised motorists not to rush into making claims through third parties while the details of the scheme are still being finalised, warning that this could lead to unnecessary fees being deducted from any compensation later awarded. Instead, the regulator encourages patience as it works to develop a process that puts consumers’ interests firmly at its heart.
This evolving situation underscores the watchdog’s ongoing commitment to transparency and fairness in consumer finance, as it seeks to balance the need for redress with the stability and future operation of the car finance sector in the UK.