More than 23 million people in the UK believe they could be entitled to compensation for mis-sold car finance, according to a new survey, as the country braces for a landmark Supreme Court decision that could unlock tens of billions in redress.
The poll, conducted on behalf of consumer law firm Slater and Gordon, found that 45% of UK adults think they may be due compensation for a car loan taken out between 2007 and 2021. The potential fallout has drawn comparisons to the notorious payment protection insurance (PPI) scandal, which resulted in more than £50 billion in payouts to consumers.
The car finance controversy centres on “secret commission” arrangements between lenders and car dealers — deals where brokers received undisclosed commission payments for arranging car loans. In many cases, those payments incentivised brokers to push borrowers towards more expensive finance packages, inflating costs without the customer’s knowledge.
The scandal escalated in October 2023, when the Court of Appeal ruled that undisclosed commissions were unlawful, expanding the scope of an ongoing Financial Conduct Authority (FCA) investigation. Lenders including Santander UK, Barclays, Lloyds, and Close Brothers could collectively face redress liabilities of up to £44 billion, according to some analyst estimates.
The FCA has been working on a redress scheme since January 2024, under which lenders would examine historic contracts to determine eligibility for compensation. However, concerns are mounting over missing customer records — many banks have routinely deleted data older than six years, meaning that claims dating back to the early years of the affected period may be harder to prove.
The Slater and Gordon survey also reveals widespread public scepticism about whether lenders can be trusted to oversee the compensation process. 40% of respondents said they would consider taking legal action if dissatisfied with the outcome of their claim.
Elizabeth Comley, chief operating officer at Slater and Gordon, warned that unless the redress scheme is perceived as fair and comprehensive, it risks becoming mired in legal challenges:
“The FCA is trying to put things right, but there’s a risk that a redress scheme leaves many people disappointed and keen to challenge the process. That sort of backlash would be bad for everyone — the scandal would drag on for years, the courts would be inundated, and the public would be denied the clear resolution they want.”
With the Supreme Court ruling expected this month, the industry, regulators and consumers alike are preparing for what could be one of the most significant consumer finance rulings in recent memory. If the court upholds the earlier judgement, it could pave the way for a wave of claims — and another costly reckoning for UK banks.
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UK car loan scandal: 23 million believe they may be owed compensation ahead of supreme court ruling
