In a statement this morning, the Financial Conduct Authority (FCA) has outlined its next steps in its motor finance review – including an industry-wide redress scheme if the Supreme Court upholds last year’s Court of Appeal ruling.
The UK’s top court is expected to hear the appeal in early April. It is part of a growing scandal surrounding the misselling of auto loans with undisclosed commission arrangements through car dealerships.
In an investigation that dates back to 2021, the body has reported on widespread failings in the handling of discretionary commission arrangements (DCAs) – which were banned back in 2021.
The FCA said: “We want to provide as much certainty as possible to firms, consumers and stakeholders.”
Earlier this month, motor finance complaints hit record levels, with the Financial Ombudsman Service (FOS) reporting that 18,658 new car loan cases had been made in the three months to December – including 10,957 credit card complaints.
In 2024, the Court of Appeal ruled that customers who were not properly informed about these commission arrangements could be entitled to compensation.
Back in December, the FCA boss Nikhil Rathi told affected customers that they should complain – in front of a select committee whose Chair Meg Hillier described the scandal as “one unholy mess”.
The ruling laid the groundwork for motor finance lenders being legally responsible for making sure that commission structures are transparent.
The FCA added: “A redress scheme would be simpler for consumers than bringing a complaint. We would expect fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive.
“It would also be more orderly and efficient for firms than a complaint led approach, contributing to a well-functioning market in the future.”
If the Supreme Court upholds the Court of Appeal ruling, this would open the door to widespread compensation – with potentially millions of drivers affected by the scandal.