Drivers could be in line for thousands of pounds in compensation due to a car finance mis-selling scandal.
Many motorists have found themselves out of pocket for years, unaware of the mis-selling scandal involving undisclosed "secret" commissions paid by lenders to car dealerships. These hidden payments have led to consumers unwittingly signing up for finance agreements with inflated interest rates.
The full scale of the issue has only recently emerged, with a significant UK Supreme Court judgement expected later in 2025. This decision will determine the extent of the repayments car finance lenders will owe to their customers.
Those who have purchased vehicles through Personal Contract Purchase (PCP) or Hire Purchase (HP) before 28 January 2021 might be eligible for substantial refunds. My Claim Group (MCG) is an organisation dedicated to assisting affected individuals, or those who suspect they may have been impacted, in reclaiming their money.
To discover the potential amount you could reclaim, visit My Claim Group's website.
The company suggests that up to 40% of HP and PCP finance deals from 2007 to 2021 could involve secret commissions, indicating that many customers may have overpaid and are entitled to compensation. With over 1.2 million claims processed so far, MCG has supported vehicle owners in pursuing claims that average around £4,000 each.
For more information, check out our comprehensive guide on the car finance mis-selling scandal:
What is the background to the scandal?
Prior to the regulatory changes in 2021, a significant number of car finance agreements were based on "discretionary commission arrangements." Under these terms, car dealers had the power to determine the interest rates on the finance deals they provided. The higher the interest rate, the more commission they earned.
This arrangement led to an undeniable conflict of interest, with dealers being financially motivated to push loans with elevated interest rates onto consumers, regardless of whether it was the most economical choice. Often, this occurred without clear disclosure of the commission structures to the customers.
Consequently, many consumers found themselves saddled with costlier loans than necessary, oblivious to the fact that the offered terms were skewed by the dealer's ambition to increase their commission earnings.
When was the practice prohibited?
In response to these issues, the Financial Conduct Authority (FCA) stepped in and, as of January 2021, banned discretionary commission models to foster greater transparency and protect consumers. Nonetheless, subsequent probes revealed that such contentious practices had been ongoing since at least 2007, leading to an extensive examination of historical lending activities.
A significant shift occurred in October 2024 when the Court of Appeal declared that the non-disclosure of commissions on car loans was illegal. This ruling broadened the scope for mis-selling claims, establishing a precedent that any undisclosed commission arrangements could now be a valid ground for consumer compensation.
This judgement has triggered a wave of complaints, with the Financial Ombudsman Service recording an unprecedented 18,658 new car finance cases in the last quarter of 2024.
What is the current situation?
The scandal led to government intervention. In January 2025, UK Chancellor Rachel Reeves stepped in to intervene in the Supreme Court case to shield lenders from potential multibillion-pound payouts, voicing concerns about the wider economic implications and the possible effect on consumers' access to car loans.
At the same time, claims management firms like My Claim Group are actively urging consumers to lodge complaints. The Supreme Court is currently examining a crucial appeal by car loan providers, following earlier judgements that sided with consumers. The FCA has temporarily halted the complaints process until the court's verdict, expected later this year.
The result of this appeal will play a significant role in determining lenders' liability.
What can I do?
If you suspect you may have been affected by the scandal, head over to the My Claim Group website for more information and start the straightforward process to find out if you're due a refund.
