Car loans: Why could drivers still get compensation after court ruling?
It came after a landmark Supreme Court ruling over whether motor finance firms complied with rules related to commission paid by lenders to dealers selling car loans.
The ruling on Friday was widely considered a victory for finance firms potentially affected, after it was judged that two key cases were did not break the law.
Here the PA news agency looks at why consumers could still be able to make claims for compensation payments.
What was the court case and why was it important?
The UK's highest court was considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit.
In each case, the car dealer made a profit on the sale of the car but also received a commission from the lender for introducing the business to them, which the three claimants argued they did not know about.
The Court of Appeal originally found that 'secret' commission payments, as part of finance arrangements made before 2021 without the motorist's fully informed consent, were unlawful.
The lenders, FirstRand Bank and Close Brothers, challenged the decision.
If the case confirmed that these three cases were all still unlawful, then consumers who bought cars with similar finance deals could make claims to potentially secure compensation.
Our aim is a compensation scheme that's fair and easy so there's no need to use a claims management company or law firm.
We'll publish the consultation by early October and finalise any scheme in time for people to start receiving compensation next year. https://t.co/47cNKnqkQX pic.twitter.com/EpfKtMzDV5
— Financial Conduct Authority (@TheFCA) August 3, 2025
What was the result?
On Friday, Lords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen ruled that car dealers did not have a relationship with their customers that would require them to act only in the customers' interest, and that the Court of Appeal was wrong.
But they said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA).
It upheld one of the three claims and stressed that it was still broadly considered 'unfair'.
What does it mean for consumers?
Consumers who are concerned that they were not told about commission and think they may have paid too much could therefore still be eligible for compensation.
The Financial Conduct Authority (FCA) watchdog said not all claims will receive payouts however.
The FCA had launched its own process to look at discretionary commission arrangements (DCAs) on motor finance deals in 2024 but had put this on hold until the outcome of the Supreme Court case.
Some 80,000 open cases on this issue were effectively paused for the ruling.
Who is eligible for compensation?
The case specifically relates to people who took out car loans between 2007 and 2021.
Consumer champion Martin Lewis said in a video posted to X that millions of people are still likely to be due payments.
He told Sky News the consultation is 'likely to mean 40% of people who got a car finance deal between 2007 and 2021 will be due some form of redress'.
How much could I receive?
The FCA said it is consulting on a redress scheme which is expected to cost between £9 billion and £18 billion.
This is expected to mean victims could receive up to £950 in compensation.
The regulator stressed that it was 'hard to estimate precisely at this stage the total cost to industry of the scheme'.
What will the compensation process be?
Currently, a lot is still not known about who exactly is eligible and how it will take place.
The FCA has said that those who have already complained do not need to do anything and advised that others with potential claims contact their car loan provider, rather than use a claims management company.
The regulator added that its consultation will be launched by early October.
If the compensation scheme goes ahead, the first payments should be made in 2026.
What does that mean for car finance firms?
The motor finance industry is expected to cover the costs of the compensation, including administrative costs.
Over the past few years, lenders and motor finance firms have been setting aside money to cover potential compensation payments.
Why has the sector reacted positively to this?
On Monday, shares in lender Lloyds and Close Brothers moved firmly higher after the ruling appeared to be more favourable than expected.
Lloyds told shareholders on Monday morning that further financial provisions are 'unlikely to be material' in order to cover likely redress payments.
While there is still some uncertainty over the cost of redress for the industry, positive outcomes in two of the cases mean they are likely to face fewer claims than previously expected.
AJ Bell investment director Russ Mould said: 'While this issue could still cause some damage, it looks unlikely to be a repeat of the PPI scandal which blighted the banking industry in the 2010s.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Scottish Sun
31 minutes ago
- Scottish Sun
Warning for savers over pension cash bonuses that could leave you £1,000s worse off
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) THOUSANDS of savers have been warned against moving their pension to a new provider in order to get a cash bonus. Some firms offer free cash payments of up to £4,100 to encourage customers to move or combine their pensions with them. 1 The regulator has warned that customers are being lured into changing their provider with short-term cash bonuses Credit: Getty But pension savers are focusing on these short-term rewards rather than the full financial implications of their decision, the Financial Conduct Authority (FCA) said. The Sun had previously warned of the danger of these cash bonuses as often they can tempt savers to switch their pension to a provider with higher fees. This can eat into their pension returns in the long term. The regulator added that pension firms have made an effort to flag the benefits of their existing scheme to customers. The regulator said that pensions dashboards will make it easier for customers to track their pensions. The dashboards will allow customers to see all of their pensions and balances in one place. This may also increase the number of people who want to combine their pension pots, the regulator said. The research was published as part of the FCA's review of life insurers' pension transfers. The regulator said on its website: 'We expect firms to be resourced with sufficient, well-trained staff to service the products they have sold or acquired and be able to respond to foreseeable spikes in demand.' Under Consumer Duty rules, firms need to put customers' needs at the heart of what they do. The FCA said it expects firms to support customers in making informed decisions. This means they should make sure they give customers enough information when they communicate with them. The FCA's website said: 'Our findings suggest that firms are well-intentioned and seek to ensure consumers receive good outcomes when transferring their pensions.' Jon Greer, head of retirement policy at wealth manager Quilter, said: 'The FCA has said it is concerned that consumers are transferring their pension provider simply to take advantage of an immediate or near-term reward or incentive.' He said cashback for pension transfers 'could be a very tempting offer' for many people. He continued: 'However, many consumers will be unaware of the benefits their existing pension arrangements may have, and that by transferring you automatically give these up. "This can include a higher tax-free lump sums or the earliest age you can access benefits – it all depends on the terms of the scheme." He added that although the FCA suggests that firms are doing what they can to provide that information to customers' looking to transfer their pensions, it is still an uphill battle to get people to engage with them. Common pension mistakes to watch out for YOUR pension can help you to build a substantial nest egg for your retirement. But you may end up with less than you think if you fall for common pension mistakes. Almost a fifth of people do not know how much money is going into their pension, according to a recent Hargreaves Lansdown study. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said this means you are less likely to know if you are on track when saving for retirement. She said: 'Take time to check what is going in and see if you can afford to boost the contribution. Even small increases over time can make a big difference. 'If you can't afford to pay more in right now then it's worth checking back next time you get a pay increase or a new job.' Check how much your employer will match your pension contributions, she advises. 'Not taking the time to check can see you miss out on money,' she said. 'Some employers will operate what is known as a matching contribution, where they will boost their contribution if you boost yours. 'This can mean a lot more goes into your pension with only a relatively modest uplift from you.' Make sure you track down missing pension pots you may have lost when you changed job or address. Around three million pensions have been lost, according to the Pensions Policy Institute. Helen said: 'Even relatively small pensions can grow over time, and you could be missing out on thousands of pounds. 'If you think you've lost track of a pension then contact the government's Pension Tracing Service.' Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
The Independent
an hour ago
- The Independent
Cashback concerns raised when people are considering transferring their pension
Concerns that some consumers may be deciding to transfer their pension based only on the prospect of rewards such as cashback have been raised by the City regulator. The Financial Conduct Authority (FCA) said some people may be focusing on an immediate or near-term reward, such as cashback on signing up to a consolidation service. This means they may not be considering the full financial implications of their decision, the regulator said. It added that it recognises the efforts firms already make to flag up to customers the often valuable benefits of their existing scheme. The regulator said that pensions dashboards, which will eventually allow people to see all their pension pots in one place, will make it easier for consumers to track their pensions. This may also drive higher demand to consolidate pension pots, the regulator said. The research was published as part of the regulator's findings from its multi-firm review of life insurers' pension transfer processes. The FCA said on its website: 'We expect firms to be resourced with sufficient, well-trained staff to service the products they have sold or acquired and be able to respond to foreseeable spikes in demand.' Under the Consumer Duty, which requires firms to put customers at the heart of what they do, the FCA said it expects firms to support consumers in making informed decisions. This means they should ensure their communications meet their customers' information needs, it said. The FCA's website said: 'Our findings suggest that firms are well-intentioned and seek to ensure consumers receive good outcomes when transferring their pensions.' Jon Greer, head of retirement policy at wealth manager Quilter, said: 'The FCA has said it is concerned that consumers are transferring their pension provider simply to take advantage of an immediate or near-term reward or incentive.' He said cashback for pension transfers 'could be a very tempting offer' for many people. He continued: 'However, many consumers will be unaware of the benefits their existing pension arrangements may have, and that by transferring you automatically give these up. This can include a higher tax-free lump sums or the earliest age you can access benefits – it all depends on the terms of the scheme. 'The FCA suggests that firms are rightly doing what they can to provide that information to a customer looking to transfer, but given where pension engagement is in this country, it is an uphill battle. 'The upcoming pensions dashboard is going to provide a lot more visibility to people of their various pensions, and thus there could be increased demand for consolidation services.'
The Guardian
a day ago
- The Guardian
Indian Super League in turmoil with domestic game on brink of collapse
Crystal Palace may be disappointed the court of arbitration for sport ruled against them on Monday but at least they now know their fate. Imagine if all Premier League clubs were waiting for a court decision that would, in effect, determine whether the season would go ahead at all. That is the situation the 14 Indian Super League (ISL) teams find themselves in. The whole of football there has been waiting for a ruling from the supreme court. It was expected in mid-July but has still not arrived. The season is due to start in September. Or at least, it was. The ISL, formed in 2013, has grown from eight teams to 14, becoming the top tier along the way. Football Sports Development Ltd (FSDL) runs the competition but put the 2025-26 season on hold on 11 July. At the time, despite the shock, most stakeholders felt it would go ahead but confidence, trust and bank balances have taken a turn for the worse. Sunil Chhetri, the biggest name in the Indian game and the third-highest active international men's goalscorer, summed it up. 'When my phone went off a few weeks ago informing us of a delay in pre-season by a fortnight, I must admit it made me smile,' the 41-year-old wrote on social media. 'And that's because I was on vacation … I had more time than I had bargained to get in shape. 'That 'fortnight' has now changed to 'indefinitely' and that smile's been wiped out … Everybody in the Indian football ecosystem is worried, hurt, scared about the uncertainty we are faced with.' On Monday, the president of the All India Football Federation (AIFF), Kalyan Chaubey, used the c-word. 'It is true that we are going through crisis for which we are not responsible,' he told the Press Trust of India. 'Some self-claimed reformers with vested interests have created this situation. I believe, by the grace of God, we will collectively be able to tide over this crisis.' It all stems from the fact that the 15-year Master Rights Agreement (MRA) between FSDL and the AIFF, which received more than £4m annually from its commercial partner, is due to end in December, before the season's halfway point. There were discussions earlier this year and new proposals from FSDL but no deal was reached. Then the supreme court told the federation not to negotiate until it rules on the AIFF's constitution. So nothing is happening. The AIFF did not comment when contacted by the Guardian. A source close to FSDL said its hands were tied by the court. 'FSDL made a leap of faith in Indian football 15 years ago,' the source said. 'The current structure is atypical in football. Moving forward, there is a requirement to move to a structure in line with global best practices such as the Premier League, where the clubs are full or majority owners of the league themselves. The proposal was that clubs become majority owners of the league, with FSDL and the AIFF still involved as equity holders, so everyone has skin in the game and aligned incentives. AIFF prefers to continue with the fixed fee every year and that was the situation in April when the supreme court said that the AIFF needs to pause.' Limbo, however, can be costly, as people still need to be paid. Even when there is football, most ISL clubs lose money. Revenue from a central broadcasting and sponsorship pool is pretty much cancelled out by the franchise fee that the owners – who range from the City Football Group to cricket stars such as Virat Kohli and Bollywood's John Abraham – have to pay. Discussions on how the league is organised are welcome and necessary but are on the back burner for now. There are more pressing issues. Three clubs have suspended salaries, football operations or both: Bengaluru, Chennaiyin and Odisha. The owner of Odisha, Rohan Sharma, gave his reasons. 'It becomes harder to justify to my stakeholders to sink Crs upon Crs [tens of millions of rupees] with nothing to show for it, and no end in sight,' he wrote on social media. 'We have: no clarity when the League will Start, nowhere to practise/play/work in Odisha, no way to get sponsorship since there's no season, no way to engage investors with an expiring participation agreement. We hoped something would give, but sadly it hasn't.' Sign up to Football Daily Kick off your evenings with the Guardian's take on the world of football after newsletter promotion That applies not only to those who work for the clubs. The Times of India reported that nine concerned match officials had written to the AIFF. 'The lack of certainty regarding continuation of ISL has created uncertainty around our future and could compel us to seek alternative employment,' the referees said. '[This] would not only impact our livelihoods but also affect the continuity and development of professional refereeing in India.' On Friday, 11 ISL clubs wrote to the governing body in New Delhi to urge it to bring the seriousness of the situation to the attention of the supreme court, threatening legal action if this does not happen. It has become a big mess. Ideally, the court rules sooner rather than later and then everything can fall into place. Sources say about six months are needed to play the league, which must finish by the last day of May, so there is some leeway. But with extra time needed for negotiations between the AIFF and FSDL, and then with broadcasters, sponsors, clubs and players, plus international windows, there is not much.
