The UK motor finance market has been through several years of legal and regulatory scrutiny over commissions paid by lenders to car dealers and other brokers.
A major Court of Appeal judgment in October 2024 initially caused significant disruption and uncertainty across the industry. The case centred on commissions paid by motor finance lenders to dealers and whether customers had been given enough information about those arrangements.
The legal position subsequently changed. In August 2025, the Supreme Court overturned important parts of the Court of Appeal ruling, finding that the customers’ claims based on bribery and dishonest assistance could not succeed. However, it upheld one customer’s claim under the Consumer Credit Act after finding that his relationship with the lender was unfair.
The Financial Conduct Authority has since introduced an industry-wide redress scheme for motor finance customers who were treated unfairly between 2007 and 2024. The scheme has itself been challenged, with parts suspended while those legal proceedings continue.
This means the story is no longer simply about lenders pausing finance following one court judgment. It has developed into a much wider issue involving commission disclosure, consumer redress and the way motor finance has been sold.
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What the Court Ruling Means
The legal position changed significantly when the Supreme Court delivered its judgment in August 2025.
The Court found that the motor dealers involved in the cases did not owe the customers the type of fiduciary duty required for the claims based on bribery and dishonest assistance to succeed. Those parts of the customers’ cases therefore failed.
However, the Supreme Court reached a different conclusion in the case of one customer, Mr Johnson. It found that his relationship with the lender was unfair under the Consumer Credit Act 1974.
Importantly, the Court did not say that every undisclosed or partly disclosed commission automatically makes a finance agreement unfair. Instead, it said the circumstances of the individual agreement need to be considered.
In Mr Johnson’s case, relevant factors included the size of the commission, the way the relationship between the dealer and lender had been presented and the information provided to the customer.
The judgment therefore narrowed some of the much broader implications of the earlier Court of Appeal decision, while leaving an important route for redress where a motor finance relationship was unfair.
How Lenders Are Responding
Following the Supreme Court judgment, the Financial Conduct Authority developed an industry-wide redress scheme for motor finance customers who may have been treated unfairly.
The scheme covers certain regulated motor finance agreements taken out between 6 April 2007 and 1 November 2024. It is intended to provide a standardised way of identifying affected agreements and calculating compensation without requiring every customer to pursue an individual complaint through the courts.
The FCA estimates that millions of motor finance agreements could potentially be eligible for assessment under the scheme. However, being within the relevant period does not automatically mean that compensation is due.
Whether a customer qualifies depends on the circumstances of the finance agreement and the commission arrangement involved.
The scheme has also faced legal challenges from parts of the motor finance industry. In July 2026, the Upper Tribunal temporarily suspended certain elements of the FCA’s rules while those challenges are considered.
As a result, the redress process is still developing. Consumers should be cautious about assuming they are automatically entitled to a particular amount of compensation and should use the latest FCA information when checking their position.
What Does This Mean for Car Finance Customers?
For consumers, the most important question is whether a previous motor finance agreement could fall within the FCA’s redress scheme.
If you used car finance between 6 April 2007 and 1 November 2024, your agreement may potentially need to be assessed. However, simply having taken out PCP, Hire Purchase or another form of motor finance during that period does not automatically mean you were treated unfairly or are entitled to compensation.
The circumstances of the agreement matter, including the type of commission arrangement involved and the information provided when the finance was arranged.
If you think you may be affected, keep any paperwork you still have relating to the agreement. Useful information can include the lender’s name, agreement number, vehicle registration and the approximate dates the finance began and ended.
You should also be wary of companies promising guaranteed compensation or suggesting that everyone who financed a car is automatically owed money. The regulatory and legal process is still developing, so the FCA remains the best source for the latest official information.
If you’re unsure how the different types of vehicle finance fit together, our guide to how car finance works explains the basics and the different ways motorists can fund a car.
Why the Position Is Still Uncertain
Although the FCA formally introduced its motor finance redress scheme in March 2026, the process has not yet reached a final settled position.
Four parties have brought legal challenges against the scheme. In July 2026, the Upper Tribunal partially suspended some of the rules while those challenges are considered.
This does not mean the entire scheme has been cancelled. Firms must continue to comply with the parts of the rules that remain in force and can continue preparing for the scheme.
However, while the partial suspension remains in place, lenders do not currently have to calculate or pay compensation under the suspended parts of the scheme.
For consumers, the practical message is therefore to keep relevant finance records, follow official FCA updates and avoid assuming that either eligibility or a compensation amount has already been decided.
What Happens Next?
The next stage depends largely on the outcome of the legal challenges to the FCA’s redress scheme.
While parts of the scheme remain suspended, affected lenders can continue preparing for redress but do not have to calculate or pay compensation under the suspended provisions.
Once the legal position becomes clearer, the FCA will be able to provide further guidance on how the scheme will proceed and what affected customers need to do.
If you previously used motor finance, there is no need to assume that you must take immediate legal action or pay a claims company to act for you. Keep your finance information where possible and follow updates from the FCA and your lender.
The motor finance commission issue has changed considerably since the original Court of Appeal judgment in 2024, and further developments remain possible. For that reason, consumers should rely on current official information rather than older headlines about automatic payouts or guaranteed compensation.
If you currently have a vehicle on finance and are thinking about changing it, it’s also worth understanding whether you can sell a car with outstanding finance and what needs to happen before the vehicle changes hands.
If you’re thinking about changing your current car, knowing its value can help you understand your options before deciding what to do next. You can value your car with jamjar and compare offers from our network of car-buying partners.