There’s a new financial scandal brewing — and it could affect millions of people across the UK. If you took out car finance before 2021, particularly on a (personal contract purchase) PCP or hire purchase (HP) agreement, you might have unknowingly paid hundreds — even thousands — more than you should have.

The issue? Hidden commissions. And after a recent UK Supreme Court ruling, the spotlight is firmly back on car finance companies, dealerships, and whether customers were fairly treated. Here’s what happened, what it means, and what you should do if you think you’re affected.

What happened?

Between 2007 and early 2021, many car finance agreements included discretionary commission arrangements — where the dealership had the power to set your interest rate, and got paid more if you agreed to a higher one.

Let that sink in: the salesperson arranging your finance often had a direct financial incentive to give you a worse deal — and most customers were never told.

This type of arrangement was banned by the Financial Conduct Authority (FCA) in January 2021, but by then, it’s estimated to have affected millions of agreements across the UK. And now, the question is whether customers are due compensation.

Which lenders are involved?

From what we’ve seen so far, if you had your agreement from any of these providers, it is likely they were involved:

• Lloyds Banking Group (including Barclays Vehicle Finance and Black Horse) has ringfenced the largest amount — over £1.2 billion 
• Close Brothers, a specialist lender, has provisioned around £165 million.
• Santander UK has earmarked about £295 million.
• FirstRand Bank (UK) and Bank of Ireland UK have also set aside substantial sums (approx. £140–£150 million combined). 

These names are at the front line: they’ve acknowledged the potential payout liabilities and are preparing for FCA outcomes.

Some firms have stated publicly they never operated discretionary commissions— and thus may be outside the scope of compensation. MoneySavingExpert lists lenders such as Admiral Finance, Advantage Finance, Autolend and Auto Money.

If your agreement was with one of these names, it’s less likely you were exposed to a DCA.

The Supreme Court’s recent decision

Last week, the Supreme Court handed down a long-awaited decision that partially agreed with the car finance companies, removing some of their liability — but crucially didn’t close the door on compensation altogether.

Two out of three test cases were dismissed, with the court ruling that commission arrangements alone didn’t automatically constitute mis-selling. But in the third case, the justices found that the lack of transparency around the commission structure did make the deal unfair — particularly as the dealer earned a 55% commission and had not disclosed how they chose the lender.

In short: most lenders were off the hook — but not all. And it confirmed that there were real cases where consumers were clearly disadvantaged.

What the FCA is planning

While the Supreme Court decision may have calmed the waters a little for finance firms, the Financial Conduct Authority (FCA) hasn’t walked away.

In fact, the FCA is now preparing a formal redress scheme — with full details expected in October 2025 and compensation payouts beginning in 2026. Estimates suggest that lenders could pay out between £9 billion and £18 billion, with most individual payouts under £950 — although some drivers with multiple finance deals could receive more.

The redress scheme will focus specifically on discretionary commission cases, but could extend to any deal where the commission structure wasn’t properly disclosed or was inherently unfair. If your loan was arranged before January 28, 2021, you’re potentially in scope.

Are you affected?

If you bought a car on finance before 2021 — especially using PCP or hire purchase — it’s worth digging out the paperwork. Ask yourself:

• Did the dealer explain how the interest rate was set?
• Were you told that they earned more if you accepted a higher rate?
• Did you get the sense that the lender was chosen independently — or was it all pushed through quickly?

If you’re not sure, you’re not alone. That lack of transparency is exactly the issue regulators are targeting.

What to do now

Here’s the good news: you don’t need to rush to a claims firm. In fact, consumer experts — including Martin Lewis — are advising against it. Most of these companies take up to 30% of any compensation you receive, and the FCA is expected to provide a free, automated way to claim as part of its redress scheme.

Instead, you should:

1. Gather your paperwork: Find your original finance agreement if possible. This includes the credit agreement, any emails from the dealer, and a copy of the repayment schedule.
2. Make a direct complaint to the lender: You don’t need legal help for this — just write or email the lender asking whether a discretionary commission was involved, and whether it was disclosed to you.
3. Wait for FCA guidance this autumn: The regulator will likely announce a system that simplifies the process for consumers — and you may automatically qualify based on your agreement alone.

If your lender responds to your complaint and refuses compensation, you can escalate it to the Financial Ombudsman Service, who will independently assess the case.

Final Thought

This is an evolving story. While the Supreme Court put boundaries around what counts as mis-selling, it didn’t deny that harm was done — and it didn’t rule out compensation. If you financed a car before 2021, you owe it to yourself to check whether you overpaid.

No need to panic and do not sign up to a no-win-no-fee outfit.

Just stay alert, keep your documents, and be ready to act when the FCA announces its plan.

Because if you were sold an unfair deal, your money should come back to you — not stay in the pockets of lenders and dealers who never had your best interests at heart.