Millions of drivers to miss out on car finance payouts following Supreme Court ruling
August 01, 2025 by Siobhan Doyle
Car changing is a big deal
Millions of UK drivers hoping for car finance compensation are set to miss out, after the Supreme Court backed banks and lenders in a major ruling.
If you were hoping for car finance compensation, you may be disappointed by the Supreme Court’s decision to side with banks and lenders in a case over hidden commission fees.
The ruling, delivered on Friday, means drivers won’t automatically receive refunds for car loans where dealers were paid undisclosed commissions – something campaigners have criticised as unfair.
A previous ruling by the Court of Appeal in October 2024 had opened the door to compensation, but the Supreme Court has now closed it.
What was the case about?
Between 2007 and 2021, some car dealers were paid secret commissions by lenders such as Lloyds, Santander, and Barclays when arranging car finance. Often, the more interest the customer paid, the more the dealer earned – but buyers weren’t told this.
The Supreme Court case focused on whether these undisclosed commissions made finance deals unfair, and whether dealers had a duty to act in the buyer’s best interest. One driver had unknowingly paid a 55% commission, and campaigners argued that thousands of similar deals were unjust.
But the court disagreed, ruling that simply not knowing about a commission wasn’t enough to make a deal “unfair.” It said dealers weren’t obliged to put customers first, overturning a 2024 Court of Appeal decision.
However, the court did side with one driver whose agreement involved an exceptionally large commission and misleading sales practices, which it found did make the deal unfair.
The ruling narrows the scope for large-scale compensation claims, but questions remain over “discretionary commission” deals, where dealers were paid more for pushing loans with higher interest rates. These were banned by the Financial Conduct Authority (FCA) in 2021, which is still considering its next steps.
Car finance scandal timeline
Here’s a rundown of how this car finance scandal has unfolded over the years:
| Date | What happened |
|---|---|
| January 2021 | The FCA banned “discretionary commission” deals. These allowed car dealers to bump up your interest rate to earn more commission – often without you knowing. |
| January 2024 | The FCA launched an investigation into these kinds of deals from 2007-2021. Around 40% of car finance agreements involved them. Complaints from drivers started flooding in. |
| February 2024 | Lloyds Banking Group (which owns Black Horse) set aside £450m to prepare for possible compensation payouts. |
| July 2024 | The FCA extended the investigation to May 2025 and said a redress scheme is now “more likely.” Lenders don’t have to reply to complaints until December 2025. |
| September 2024 | This was the original end date for the FCA investigation – but it’s now been delayed. |
| October 2024 | The Court of Appeal ruled that it was illegal for car dealers to earn hidden commissions without telling customers. Lenders paused loans, and banks prepared for possible £16bn in payouts. |
| November 2024 | The FCA launched a consultation to extend the time period for compensation claims. This could open the door for many more people to be eligible. |
| December 2024 | The Supreme Court agreed to hear appeals from lenders who want to overturn the earlier ruling. |
| January 2025 | Chancellor Rachel Reeves tried to get involved in the case, warning it could harm the UK’s financial reputation. Bank shares jumped on the news. |
| February 2025 | The Supreme Court blocked Reeves from joining the case but allowed the FCA to step in. The FCA warned that upholding the ruling could cause problems for the financial system. |
| April 2025 | The Supreme Court heard the case over three days. Lenders argued the earlier ruling was wrong and should be overturned to avoid huge compensation claims. |
So, am I getting compensation?
For most people, no. This decision makes it much harder to win a refund over hidden commissions.
Analysts had estimated that banks could face up to £44bn in payouts if the case had gone the other way. That would’ve been on the same scale as the PPI scandal, which saw banks shell out over £50bn.
Now, lenders have avoided that massive bill – and millions of drivers won’t see a penny.
Is there any hope of getting money back?
Possibly. There’s still a chance for individual claims – especially if the commission you were charged was extremely high or the deal was misleading in other ways, according to the founder of MoneySavingExpert, Martin Lewis.
So, if your car finance involves excessive interest or misleading paperwork, it might be worth speaking to a solicitor or contacting the Financial Ombudsman.
Just don’t expect a big, government-backed compensation scheme as that’s no longer on the table.
What happens next?
The Government says it’s working with regulators to understand the full impact of the ruling. There are also plans to reform the rules around car finance and consumer protection to avoid similar issues in the future.
Consumer law firm Bott and Co, which represents hundreds of thousands of affected consumers, said today’s decision is a “serious setback for financial justice” – but stressed that all is not lost.
“This is a bitter pill to swallow,” said solicitor Coby Benson. “It sends a concerning message to the industry that a lack of transparency can go unpunished. But we will not stop here – there are still avenues for redress, and we urge consumers not to give up.”
For now, though, don’t sign up to any claims firms promising quick payouts. With no redress scheme currently in place, you could end up paying fees for a claim that goes nowhere.
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