Supreme Court rules on car finance: latest

If you bought a car, van or motorbike on PCP or Hire Purchase between 6 April 2007 and 1 November 2024, you could be due compensation.
The Financial Conduct Authority (FCA) has completed its consultation on a nationwide compensation scheme and will publish final rules in early 2026, setting out exactly who is eligible, how compensation will be calculated and when payments will begin. The ruling is complicated, but centres on what it describes as the three-way relationship between the person buying the car, the dealer supplying it and the finance company providing the credit, and on whom the responsibility lies for this being a fair deal. Crucially, the FCA now expects most eligible drivers to be contacted automatically by their lender and given the option to opt out of the scheme if they prefer to pursue a court claim, rather than having to opt in. More on this below. It's complicated but we’ll break down the details below for a sense of how we got here and what happens next, with ongoing updates as more news comes in.

The FCA’s consultation closed in December 2025, and final rules are now due in early 2026, with payments expected to begin later in the year once firms have implemented the scheme. The FCA continues to indicate that average compensation is likely to be in the region of £700 per agreement, reflecting a standardised, streamlined approach designed to handle the scale of claims.
The FCA scheme would apply to loans taken out between April 2007 and November 2024, and could affect as many as 14 million car buyers. Given that scale the compensation scheme has been designed to be as simple and quick as possible. The compensation should apply to people who were not aware of one of three commission arrangements between the company lending the money and the broker (usually a car dealer) introducing them to the buyer. The FCA has also confirmed that Personal Contract Hire (PCH) leasing agreements are generally outside the scope of the scheme, which focuses on motor finance products such as PCP, HP and hire purchase taken out via a broker or dealer. Compensation will be paid if the broker didn’t tell the customer the rate of interest could be varied (the discretionary commission arrangement or DCAs explained below), if the commission was unusually high or the broker implied they would shop around for the best deal but didn’t tell the customer they had an existing arrangement with a preferred lender. The FCA has reiterated that most consumers will not need to use a claims management company. Under the proposed model, eligible customers will be contacted directly by their lender and can choose to opt out if they wish to pursue a court claim instead. Using a third party risks losing a significant share of any payout. The FCA has also extended the pause on lenders issuing final responses to commission-related complaints until 31 May 2026, to allow the scheme to be finalised and implemented.

The Supreme Court judgement focused on three consumers who argued that the car dealers, acting as brokers, failed to disclose commission payments and this affected the impartiality of the finance advice they gave. The Court of Appeal reviewed and the ruled in favour of the consumers while the Supreme Court, in its August 2025 judgment, upheld only one of the three claims.
Separately, the FCA is reviewing historical discretionary commission arrangements (DCAs) in motor finance, banned since 2021, to assess possible past misconduct and the need for compensation. Despite a similar subject, this is a different matter to that considered by the Supreme Court. The FCA anticipates hundreds of thousands of consumers may qualify for payouts, with most payments in the hundreds of pounds, not thousands. Since the Supreme Court ruling, the FCA has suggested there will be a significant number of consumers affected and due some sort of compensation, though this is likely to be ‘in the hundreds rather than thousands’ in terms of each payout. The judgement provides legal clarity on when undisclosed commission can make a finance agreement unfair, but it does not create an automatic right to compensation. Instead, it underpins the FCA’s case-by-case redress scheme rather than any sweeping ‘class action’. Throughout, the FCA has been clear in its advice to consumers not to take up the offers made by Claims Management Companies to act on their behalf, given there is still much to be decided, the FCA will manage the process and any third party involved will take a significant cut of any compensation you may be due. The FCA has already taken action against more than 200 such companies for making exaggerated compensation promises.

The legal battle began when three consumers claimed they were mis-sold car finance due to undisclosed dealer commissions. After losing in lower courts, the Court of Appeal ruled in their favour, stating that undisclosed commissions could breach brokers’ duties. Finance companies paused new lending and appealed to the Supreme Court for a final decision.
The dispute centres on dealer commissions earned when arranging car finance. Although not illegal, concerns arose about dealers and lenders adjusting commission payments without informing customers; these Discretionary Commission Arrangements (DCAs) were banned in January 2021. The recent Supreme Court judgement did not focus on DCAs but rather on three customers’ complaints about unfair treatment by finance companies. The Financial Conduct Authority (FCA) and the Court of Appeal sided with the customers, but the Supreme Court upheld only one case. This decision now guides the FCA’s ongoing investigation and future compensation parameters.

The Financial Conduct Authority (FCA) is a financial regulatory body and conduct regulator for financial services firms and markets in the UK. It is investigating the issue using powers under the Financial Services and Markets Act 2000.
Following the Supreme Court judgment, the FCA has designed a compensation scheme that could see up to £8.2bn distributed among around 14 million affected drivers, once final rules are published in early 2026. The scheme has been designed to be as easy and quick as possible, meaning claimants can avoid using claims management companies who would take a cut of any payout due. At the moment the FCA estimates most payouts should be in the region of £700. More widely, the FCA has identified three situations where it considers commission may have been unfairly charged. These include where the consumer was not told the broker and lender could vary the interest rate on the loan (the discretionary commission model), where the commission was excessive (for example around 35 per cent of the cost of the credit and 10 per cent of the loan), or where the broker implied it would search the market for the best deal but did not disclose it was tied to a preferred lender.

Under its proposed scheme the FCA says if you think you weren’t told about commission arrangements on your car finance you should complain to the lender. You can do so with a templated letter available on its website if you haven’t already.
If you’ve done so and this has been acknowledged you don’t need to do anything but if it’s been longer than eight weeks you should chase them up. While the scheme hasn’t started yet you can still complain now and this may help speed the process up. The temporary pause on final complaint responses runs until 31 May 2026, after which lenders will resume issuing decisions under the new rules. Under the FCA’s proposed opt-out model, most eligible customers will be contacted automatically by their lender once the scheme goes live. You will not need to do anything unless you wish to opt out and pursue a court claim instead. Unless you plan to take your case to court there should be no need to involve a claims management company, given this may mean you end up getting less of the compensation owed.

The FCA expects most compensation payments to be within the region of £700 per claim. The FCA says this reflects a standardised approach designed to handle the unprecedented volume of cases quickly and fairly, even if it produces lower awards than some early estimates.
If you feel your case merits further investigation you do, of course, have the option to pursue it through the courts and you may get more. But any gains may be wiped out by costs, or you could actually see your compensation reduced. In most cases the FCA advises the scheme is the fastest and fairest way to resolve a claim.

Car finance is still available while this investigation is ongoing.
You may find brokers (retailers) advise you that they will receive commission, but remember, this is a common and legal way for brokers to make a living and, while discretionary commission arrangements have been banned, the FCA’s ban doesn’t cover all types of commission. Under the new rules, the retailer (acting as a broker) must confirm you’re paying commission. You’re well within your rights to ask how commission affects the final amount you pay. Whenever you look at a finance plan, you should make sure you can afford the monthly repayments and that you read and understand the terms and conditions. Take your time to research the types of finance available, how much you’d have to pay and when by, plus what would happen if you fell behind with payments. Ask the retailer any questions you have, and don’t rush into a decision. Back to top

The implications of the Supreme Court ruling will take some time to digest but, broadly, it has seemingly decided that apart from in one specific case dealers and finance providers were acting lawfully. So, basically, it will be business as usual. You may, however, find you are provided with more information regarding any commission or payments retailers or brokers involved in vehicle finance receive in order to help you make an informed decision.
Speaking on behalf of lenders in his role as Director General of the Finance and Leasing Association, Stephen Haddrill told the BBC the ruling could end up making finance more complicated and therefore expensive for some consumers, especially those on lower incomes. How this shakes out remains to be seen. Back to top

This issue affects any circumstance where finance, through a broker or dealer, that has a discretionary commission arrangement included in the contract has been used to acquire vehicles such as cars, vans, camper vans and motorbikes between 2007 and 2021.
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