Compensation scheme for car loan mis-selling could reach £18 billion

In the United Kingdom, a significant ruling from the Supreme Court has altered the landscape for drivers who were mis-sold car loans involving hidden commission payments. The court decided that lenders are not liable for these concealed commissions, which had long been challenged by consumers who felt misled about their finance arrangements. This ruling came after two lenders, FirstRand Bank and Close Brothers, contested a previous Court of Appeal decision that deemed such payments unlawful unless motorists provided fully informed consent. As a result of this Supreme Court decision, many drivers who had hoped for compensation will not receive it. The decision means that only a small number of the most serious claims will proceed, greatly reducing the potential payout from what could have been up to £45 billion had the previous ruling been upheld. The Financial Conduct Authority (FCA), which is overseeing the compensation scheme, estimates that the total cost could be around £18 billion, although they believe this is an unlikely scenario. More realistically, analysts predict a cost closer to £9 billion to administer the scheme, with individual compensation amounts likely to be less than £950 for affected motorists. The FCA has indicated that consultations for the payout process will commence by early October 2025, with the first compensation payments not expected to be disbursed until 2026. For consumers who have already filed complaints, they do not need to take further action for their claims. The FCA has emphasized that those who believe they paid too much due to undisclosed commissions should file their complaints directly, without the need for intermediaries. FCA chief executive Nikhil Rathi stated the importance of ensuring that consumers receive compensation from firms that have broken the law.