Martin Lewis Warns Millions May Be Owed Car Finance Compensation Under FCA Review

Published: 04 August ‘2025 | The English Chronicle Desk

Millions of motorists across the UK could be in line for compensation following revelations of widespread mis-selling in the car finance industry. Renowned financial expert Martin Lewis has revealed that drivers who took out car finance agreements before 2021 may be eligible to claim money back — though most should expect “hundreds, not thousands” of pounds per case.

The announcement follows a statement from the Financial Conduct Authority (FCA), which confirmed it will open a formal consultation this October regarding a redress scheme. This scheme aims to compensate those impacted by “discretionary commission arrangements” — a now-banned practice where car dealers and brokers increased interest rates to secure higher commissions, all without informing the customers.

Speaking to Sky News Radio, Martin Lewis, founder of MoneySavingExpert.com, said it is “very likely” that around 40% of Britons who entered into personal contract purchase (PCP) or hire purchase agreements between 2007 and 2021 could be affected. While the exact amount of compensation will vary, Lewis estimated that individuals could receive up to a maximum of £950 per car finance deal — with higher payouts only likely if someone had multiple agreements in place.

According to Lewis, motorists who suspect they were mis-sold finance deals should begin by checking whether their agreements involved discretionary commission. This can typically be done by writing directly to their car finance provider. However, he strongly cautioned against turning to claims management firms, which often take up to 30% of the compensation as fees — even if the payout is made automatically without their involvement.

“They’re hardly going to do anything for you and you might get the money paid to you automatically anyway,” Lewis noted.

The FCA’s review uncovered that many firms failed to comply with regulations and disclosure requirements at the time the loans were issued. The regulator stated that consumers “should be appropriately compensated in an orderly, consistent and efficient way.”

Lewis emphasized that while the consultation begins in October and will last six weeks, actual payouts are unlikely to begin until 2026. Furthermore, the structure of the compensation process remains undecided — though he believes it will either be automatic or require an opt-in application from consumers.

A potential complication, he added, lies in how long ago some of the deals were made. Certain finance providers may have already destroyed records of older agreements, which could pose a challenge for those seeking to claim.

As the FCA moves closer to finalising the details of the compensation framework, Lewis urges the public to stay informed — and to take action only when more concrete guidance is released. In the meantime, the spotlight remains firmly on the motor finance industry, as regulators aim to ensure fairness for consumers who may have been unknowingly exploited.