Martin Lewis Calls Out Car Finance Scandal as FCA Proposes Redress Scheme
So, there’s been a lot of buzz lately around car finance mis-selling, and if you’ve bought a car on finance anytime between 2007 and early 2021, this might actually affect you. Personal finance expert Martin Lewis has weighed in, and he's not mincing words about what people should expect — or avoid.
Let’s start with what happened. The Financial Conduct Authority (FCA) is working on a redress scheme for people who were mis-sold car finance deals under what’s known as “discretionary commission arrangements.” Basically, dealers were being paid higher commissions if they charged customers more interest — but they weren’t telling buyers about it. That’s where the problem lies. The Supreme Court recently ruled that while hidden commissions weren’t automatically illegal, there could still be grounds for redress if the arrangement was “unfair.”
Martin Lewis explained that nearly 40% of people who took out car finance — especially Personal Contract Purchases (PCPs) or Hire Purchase — from 2007 to 2021 could be eligible for some kind of payout. But let’s be clear — it won’t be a jackpot. Most compensation will likely be under £950 per deal. In fact, Lewis said unless someone had multiple finance agreements, they should expect to receive “hundreds, not thousands.”
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Now here’s where it gets messy. The Finance and Leasing Association (FLA), which represents car finance firms, has called the FCA’s plan “completely impractical.” They’re worried about how anyone will be able to verify claims going all the way back to 2007. Think about it — many companies may no longer have those records, and let’s be honest, neither will most customers.
And that leads to the next point: paperwork. The head of the FCA, Nikhil Rathi, admitted that missing documents could make things tricky. Some cases may even have to go through the courts if there's not enough evidence either way. But don’t panic — the FCA says it will try to make the process straightforward, and importantly, you do not need to use a claims management company. Lewis warned against them too, pointing out they could take 30% of any payout, and for something you might get automatically, that’s a big chunk of money for doing basically nothing.
The consultation on how this will all work officially starts in October and will run for about six weeks. After that, if all goes to plan, compensation could start being paid out sometime in 2026. The total cost of the scheme? It's expected to land somewhere between £9 billion and £18 billion — a lot, but still much lower than earlier fears of a £44 billion hit to the industry.
So what should you do right now? If you think you were affected, the FCA recommends contacting your lender first — and don’t wait around for claims firms. This isn't another PPI saga, but it could still mean a bit of money back for millions of drivers.
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