Car finance mis-selling latest – why this week's court case is only half the story

The Court of Appeal's decision, issued in October 2024, had been appealed by car finance firms Close Brothers and Motonovo. The Supreme Court will now consider the appeal over the course of a three-day hearing.

Supreme Court decisions can take anywhere from a few weeks to several months. While this case is likely to be done more quickly than usual due to its large scale and huge public impact, we still don't know exactly how long it will take; if it came out before the summer that would be fast.

The Supreme Court case is about a specific type of car finance mis-selling

There are two main types of car finance mis-selling being looked at by regulator the Financial Conduct Authority (FCA) and the courts right now:

1. Discretionary Commission Arrangements (DCAs) – not a direct part of the Supreme Court case. This applies to about 40% of car finance deals, and is where brokers and dealers could increase the amount of interest they charged customers (without telling them) on Personal Contract Purchase (PCP) and Hire Purchase agreements up to 2021 in order to increase their commission. This hidden commission was obviously problematic.
   
   This is the type of car finance mis-selling that MoneySavingExpert.com founder Martin Lewis has been talking about and suggesting people complain about. If you're one of the over 2.5 million who have put complaints in through our free tool, then it is very likely it was a DCA complaint.
   
   The FCA has already confirmed that it will consult on a car finance mis-selling redress scheme. This would require lenders to proactively contact borrowers and offer them fixed redress – though it's not yet clear what the mis-selling criteria will cover as this will be finalised following the Supreme Court's judgment.

2. Commission Disclosure complaints – the subject of this week's Supreme Court hearing. These are based on the Court of Appeal ruling that if car finance agreements didn't tell consumers all details of commission, including the amount (they rarely did), they were unlawful. It applies to up to 99% of car finance cases (including DCA cases).
   
   That Court of Appeal ruling took everyone, including the regulator, by surprise – and was not something it was looking at. Even Martin has said he has concerns that the decision risks doing more harm than good.

So, in summary, while Commission Disclosure complaints are all about the courts, DCAs were about a breach of the FCA regulations. Yet even on that, the regulator can't act until it has clarity from the court.

What happens next

Over to Martin to explain the likely outcomes:

Is it still worth putting in a complaint now?

The regulator has signalled it intends to make lenders proactively contact people, so there's far less urgency.

However, putting in a claim may still be helpful to help firms track who's affected – particularly if you've moved home or your contact details have changed.

If you do decide to put in a complaint, make sure to use a free tool – such as the one in our Reclaim car finance guide – to avoid the risk of sacrificing a massive portion of your compensation to a claims firm.

Car finance mis-selling – a brief timeline

• In January 2024, the FCA launched a huge investigation into car finance mis-selling, specifically looking at hidden DCAs, which allowed brokers and dealers to choose from a range of interest rates, and to earn more commission if they charged a higher one. Since then, over 2.5 million complaints have been made via our free DCA tool.

• In October 2024, a landmark Court of Appeal verdict then shook things up. It ruled that car sales firms couldn't lawfully receive commission from finance firms unless they had the customer's "fully informed consent", making payouts more likely. This meant anyone who'd had commission of any type on a car finance agreement could potentially be owed money back.
  
  But the car finance firms involved – Close Brothers and Motonovo – appealed this judgment to the Supreme Court. This hearing is the one now taking place.

• In December 2024, the FCA extended a pause on firms dealing with car finance complaints to all commission complaints – not just DCAs as was previously the case.
  
  This means car finance providers do not have to provide final responses to motor finance non-DCA commission complaints received on or after 26 October 2024 until after 4 December 2025.

• In March 2025, the FCA confirmed that it will consult on a redress scheme, and will announce the next steps for complaints six weeks after the Supreme Court makes its decision.