Drivers should be ‘very pessimistic' over car finance claims, say lawyers
Industry analysts also said on Friday that banks will 'breathe a sigh of relief' after the Supreme Court ruled they are not liable for hidden commission payments in car finance schemes.
Nevertheless, the financial watchdog has said it is still considering whether to launch a redress scheme for consumers who potentially receive compensation.
Lawyers have also indicated that some consumers should still consider pursuing their claims over 'unfair' treatment.
We welcome that the Supreme Court has clarified the law. We want to provide clarity as quickly as possible. So we'll confirm whether we will consult on a redress scheme before markets open on Monday 4 August. https://t.co/xlWulkOyEj pic.twitter.com/GrCuk1dFk8
— Financial Conduct Authority (@TheFCA) August 1, 2025
Two lenders, FirstRand Bank and Close Brothers, went to the UK's highest court to challenge a Court of Appeal ruling which found 'secret' commission payments paid by buyers to car dealers in agreements before 2021 without the motorist's fully informed consent were unlawful.
The ruling last year found three motorists, who all bought their cars before 2021, should receive compensation.
But in a decision on Friday, justices at the UK's highest court overturned the Court of Appeal, though some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA).
Lawyers for the lenders told the Supreme Court at a three-day hearing in April the decision was an 'egregious error', while the Financial Conduct Authority intervened in the case and claimed the ruling 'goes too far'.
However, the judges upheld a claim brought by one driver under the CCA that his relationship with the finance company had been 'unfair', awarding him the commission amount of £1,650.95 plus interest.
Lizzy Comley, chief operating officer of consumer law firm Slater and Gordon, said the ruling still reinforces the right of many consumers to pursue claims.
Following today's Supreme Court decision regarding the mis-selling of car finance, Slater and Gordon's, Elizabeth Comley, has issued the following statement. Read the statement in full on our website: https://t.co/ec2WpUMOWg pic.twitter.com/X08oT7GfuE
— Slater and Gordon UK (@SlaterGordonUK) August 1, 2025
She said: 'This landmark ruling is positive news for the millions of people who have lost money due to the car finance mis-selling.
'The court confirmed that for years, consumers have potentially been unfairly overcharged on car finance agreements, and this ruling reinforces their right to pursue justice and recover the compensation they deserve.'
However, others have said that the ruling will make it harder for most claims.
Nicola Pangbourne, partner at Kennedys law firm, said: 'If I was a driver, I would be very pessimistic about getting compensation. There's now quite a few hurdles they've got to get through.'
Industry experts have suggested the ruling will be broadly seen as a success for lenders, who had been preparing for significant compensation payments.
Caroline Wayman, global head of financial Services at PA Consulting, said: 'Lenders will breathe a sigh of relief at the ruling, but it should still be a wake-up call for firms to scrutinise any large, undisclosed commissions in their business.
'Firms should ask themselves whether it still feels justifiable or could be considered unfair, particularly if they haven't disclosed commercial ties to the broker and it won't be enough to expect customers to have read and understood the fine print.'
On Friday, a spokesperson for the Financial Conduct Authority said after the ruling that it would confirm whether it will consult on any such scheme by 8am on Monday.
They said: 'We want to bring greater certainty for consumers, firms and investors as quickly as possible.'
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