Millions of UK Drivers Could Be Owed Hundreds in Car Finance Compensation – Here’s What You Need to Know

Millions of UK Drivers Could Be Owed Hundreds in Car Finance Compensation - Zomi Wealth
If you took out a car finance loan before 2021, you might be owed hundreds—or even thousands—of pounds in compensation. A recent ruling by the Court of Appeal, combined with action from the Financial Conduct Authority (FCA), has put a spotlight on mis-sold car finance agreements. Millions of UK drivers could be entitled to payouts, with total compensation estimates climbing to £30 billion.

What’s the Issue? Hidden Commission Costs

At the heart of the controversy are Discretionary Commission Arrangements (DCAs), a practice that allowed car dealers to increase the interest rate on loans, boosting their commission without the buyer’s knowledge. This led to buyers paying more than necessary for their finance agreements.
In 2021, the FCA banned these commission-based arrangements, but loans taken out before the ban remain under scrutiny. The Court of Appeal’s October ruling reinforced the illegality of lenders paying commissions to car dealers without borrowers’ consent, opening the door for widespread claims.

How Much Could You Be Owed?

Compensation amounts will vary depending on the loan and interest rate, but many drivers could receive hundreds of pounds. Industry analysts believe payouts could rival those of the Payment Protection Insurance (PPI) scandal, with some calling this the “new PPI.”
Banks and lenders have already set aside significant funds to cover potential payouts:
 
  • •  Lloyds Banking Group has earmarked £450 million, with estimates that its total compensation costs could rise to £3.9 billion.
  • •  Santander has delayed its financial reporting as it prepares for payouts estimated at £1.4 billion.

How to Check if You’re Eligible

If you believe you were mis-sold car finance, here’s how to start the process:
 
1. Check Your Agreement:
Look for clauses about commission or contact your lender to request details of your loan terms.
 
2. Use Online Tools:
Websites like MoneySavingExpert provide free tools, such as the Reclaim Finance Checker, to help you determine if you’re eligible.
 
3. File a Complaint:
You can lodge a complaint directly with your lender or through the FCA-approved MoneyHelper website, which offers free guidance.
 
4. Act Quickly:
The FCA has extended the deadline for dealing with complaints to May 2025, but acting sooner ensures your case is reviewed promptly.

Impact on Lenders and the Economy

The Court of Appeal’s decision has sent shockwaves through the financial sector. Major lenders, such as Lloyds and Santander, face significant financial exposure, with share prices already taking a hit. The chief executive of Lloyds Banking Group, Charlie Nunn, has warned that this ruling could pose broader challenges for the UK economy and consumer finance sector.
While banks are preparing to appeal, experts believe the chances of overturning the ruling are slim, making it likely that compensation payouts will continue to grow.

Why You Should Act Now

If you’ve taken out car finance in the past and suspect you were charged hidden commissions, now is the time to act. Compensation could make a significant difference to your finances, especially during challenging economic times.
Don’t delay—check your eligibility, file a claim, and seek advice if needed. With billions at stake and deadlines looming, ensuring you receive what you’re entitled to could be one of the most important financial moves you make this year.
For more information, visit trusted resources like the MoneyHelper website or consult with a financial expert to guide you through the claims process.

Sources:

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