Martin Lewis Shares Crucial Update on UK Car Finance Scandal – Thousands Could Be Owed Up to £950
Martin Lewis has issued an important update on the ongoing car finance mis-selling scandal that could lead to refunds worth hundreds for drivers across the UK.
The Financial Conduct Authority (FCA) has launched a formal consultation on a major compensation scheme, potentially costing lenders up to £18 billion.
This comes after a Supreme Court ruling on 1 August, which dismissed most claims related to hidden commission in car finance agreements. However, the ruling didn’t put an end to the matter.
A separate stream of claims, focused on Discretionary Commission Arrangements (DCAs), remains unaffected by the court’s decision and could still result in significant payouts for consumers.
These DCAs allowed car dealers and brokers to bump up interest rates purely to increase their commission, without telling the customer. The practice was banned in January 2021, but millions of drivers may have already signed up to deals involving such commissions.
Martin Lewis explained that the recent court decision only affected one strand of the wider mis-selling scandal, and not the one most consumers have complained about.
“The one most people have complained about wasn’t involved in the Supreme Court decision, although it was on hold just in case anything in that decision caused a wobbler for DCAs,” he said.
“It is when you went to a car broker or dealer and it increased the amount of interest that you were charged to increase the amount of commission without telling you.”
Anyone who took out a personal contract purchase (PCP) or hire purchase (HP) deal before 2021 is potentially eligible for compensation.
According to Lewis, those on 0% finance or who were charged only a minimal commission are unlikely to benefit from the scheme. But many others could be due payments worth hundreds of pounds.
In fact, Martin Lewis has detailed how some people could reclaim up to £950 under the upcoming compensation plan, depending on the interest and commission involved.
The FCA and Lewis are both urging people not to sign up with claims management companies at this stage. They warn that the scheme is likely to be automatic, meaning lenders will be required to contact customers directly.
If someone has already agreed to use a claims firm by then, they could lose up to 30% of their refund in fees, despite no work being done by the firm.
According to the FCA, most people will receive less than £950 in compensation per agreement, with the exact amount depending on how the final scheme is structured. The first payments are expected to begin in 2026.
Lewis added that affected customers could expect to be reimbursed the difference between the standard interest rate and the inflated one they were charged, plus an estimated 3% simple interest per year.
“The very high likelihood is that many people who had a discretionary commission arrangement where they were charged more interest than they should have been will get back a chunk of that in the hundreds of pounds at some point in 2026,” said Lewis.
Still, he acknowledged that the finance industry may resist the compensation scheme and urged firms to accept what he called a “fair compromise”.
Drivers who believe they may be affected should act now and file a complaint directly. Avoiding claims companies at this stage could make all the difference in securing the full amount owed.
This is a UK-based financial issue, and any motorist who entered into a PCP or HP agreement before January 2021 should review their paperwork and stay alert to further announcements from the FCA and Money Saving Expert.
