Motor Finance Mis-Selling: FCA Redress Scheme

In anticipation of the FCA’s motor finance redress scheme, which is expected to be announced later today, it is important for consumers to understand their rights and the opportunities for redress where car finance may have been mis-sold.

Financial product mis-selling occurs when a product is sold without fully explaining the associated risks or providing accurate information. Motor finance mis-selling has gained significant attention following landmark court rulings on Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements.

Court of Appeal Rulings

In 2024, the Court of Appeal found in favour of three consumers who claimed that car dealers acting as credit brokers failed to disclose commissions paid by finance lenders. The ruling clarified that:

• Brokers cannot lawfully receive commissions without a customer’s fully informed consent.
• Dealers owe a fiduciary duty to act in the customer’s best interests.
• Failure to disclose commissions can render finance agreements legally vulnerable.

Supreme Court Decision

The Supreme Court reinforced these findings in the case of Johnson v FirstRand Bank Limited, particularly supporting claims involving high, undisclosed commissions. This landmark ruling has paved the way for future claims under PCP and HP agreements.

FCA Redress Scheme

Following the Supreme Court decision, the FCA is expected to publish a motor finance redress scheme to provide compensation to customers affected by unfair commission arrangements. Key points include:

• An estimated 30 million finance agreements will be reviewed, though compensation will be awarded in fewer than half of cases.
• Most consumers may receive less than £950, with bulk payments expected to begin in early 2026.
• The overall scheme could cost between £9–18 billion, reflecting the scale of potential claims.

What This Means for Consumers

The redress scheme offers a clear path for those affected to claim compensation where commissions were undisclosed or unfair. It emphasises transparency and disclosure in motor finance, helping buyers make more informed decisions, even though motor dealers are not legally required to act solely in the customer’s interest.

How We Can Help

Narinder Hayer, Partner at Lansdowne Law leads our financial mis-selling team and has extensive experience in handling complex claims. Having worked at a leading national law firm for over 10 years, Narinder has helped countless clients secure compensation. She is recognised for her practical approach and dedication, often applauded by clients for achieving the best possible results.

“We are looking forward to the FCA’s announcement of the motor finance redress scheme. Once published, we will be able to provide clear guidance and support to those affected, helping them understand their rights and navigate the claims process,” says Narinder Hayer.

For advice on motor finance mis-selling claims and the upcoming FCA redress scheme, contact our team today.