The background
For years, many car finance lenders let dealers set the interest rate on a customer’s finance and paid them more commission the higher the rate. The FCA banned these “discretionary commission arrangements” from 28 January 2021.
The Supreme Court ruling
In August 2025 the Supreme Court decided three test cases. It didn’t agree that dealers owed customers the strict legal duties the Court of Appeal had found, but it did find one customer’s relationship with the lender unfair, because of the size of the hidden commission and how it was presented.
The FCA scheme
The FCA then designed a compensation scheme covering agreements from 6 April 2007 to 1 November 2024. Its final rules were published in March 2026, with an average estimated payment of around £829 per agreement. In 2026 three lenders and a consumer group challenged the scheme at the Upper Tribunal. While the challenges are heard, lenders don’t have to work out or pay compensation, so payments are unlikely before 2027.
The scheme only pays out where the commission arrangement was one of the kinds it covers: a discretionary commission arrangement, a high commission arrangement, or an undisclosed tied arrangement.
What should you do?
- Make a note of any car finance you’ve had since 2007: the lender, the dealer and roughly when.
- Keep an eye out for letters or emails from your lender about the scheme.
- You can complain to your lender yourself at any time, for free. Our free car finance letter can help.
- If you’d rather a regulated firm handled it, do our free check.
For the latest official position, see the FCA’s car finance pages.