Car Finance Mis-Selling: What You Need to Know

One of the biggest consumer finance scandals in the UK

Between 2007 and 2021, millions of drivers were overcharged for car finance through hidden commission models that inflated loan interest rates. Under these “discretionary commission arrangements”, dealers were incentivised to charge customers higher rates of interest because it increased the commission they received from lenders. Crucially, drivers were never told this was happening.

This practice was banned in 2021 – but not before it cost consumers billions of pounds. Many were locked into deals that were far more expensive than they needed to be, often without ever realising it.

In August, the Supreme Court heard three test cases on car finance. Two were dismissed, but one was upheld, confirming that lenders’ past practices were unfair. This ruling sets an important precedent: while not every case will succeed, millions of consumers are still likely to be owed compensation.

The Financial Conduct Authority (FCA) will shortly consult on a redress scheme, which could see millions of people entitled to repayments. The FCA has already been questioned on this issue at the Treasury Select Committee, but further scrutiny is required.

Why this matters for your constituents

• 45% of UK adults believe they may be entitled to compensation.
• 43% of those affected have a characteristic of vulnerability, making it harder for them to navigate claims
• 57% of potential claimants have moved house since taking out finance, and 36% no longer have the paperwork – meaning many will be missed by a lender-led scheme
• 62% trust the FCA to resolve this issue, but only 19% trust the banks.

This issue cuts across party lines. Almost every MP will have constituents who are affected, and who will be looking for answers.

If large numbers of people are excluded from redress, the consequences will go beyond consumer frustration. If the process is seen to favour financial institutions over ordinary people it risks fuelling public cynicism and undermining trust not just in the lenders responsible, but also in the FCA and Parliament.

Why the option of a lawyer matters

The FCA is considering a scheme that would rely on lenders to identify and compensate victims. Yet fewer than a quarter of people say they would trust lenders to do this fairly.

Excluding legal support carries serious risks:

• Vulnerable consumers being left behind.
• Large numbers of claims being missed, due to poor records.
• Public disappointment and legal challenges, further delaying redress.

Polling shows that 65% of vulnerable consumers want the option of a lawyer, rising to 85% among those lacking financial confidence

Slater and Gordon operate on a No Win, No Fee basis, meaning consumers pay nothing upfront and only contribute if they win their case.

How you can help your constituents

Awareness is a key barrier: half of those who may be eligible are unsure about whether they might be qualify for redress.

As an MP, you can play a crucial role by:

• Raising the issue in Parliament. Call on the FCA to ensure the redress scheme reflects the needs of ordinary consumers, not just lenders.
• Signposting constituents to clear, independent legal support if they want it.

This is one of the largest consumer finance scandals in recent history. As an MP, you have the power to help ensure your constituents are not left behind. By raising this issue in Parliament and pressing for a fair, transparent redress scheme, you can help ensure that ordinary people get the compensation they deserve — and show that Parliament is on their side, not the side of the banks.

To learn more or to discuss how Slater and Gordon can support your constituents, please contact our team on 0330 041 5869 or get in touch via our online form.