Martin Lewis has updated drivers as 14 million are due £700 compensation payouts, under the UK financial watchdog’s proposed scheme.
He said: “This could be worth hundreds – possibly thousands – of pounds for millions of drivers. It’s not one to ignore.”
The Financial Conduct Authority (FCA) estimated its redress scheme could cost lenders £8.2 billion in compensation, based on about 85% of eligible consumers taking part.
NEWS. Car Finance Mis-selling: Payouts of £700 likely for 14 million people.
Martin Lewis’ instant analysis of the regulators just announced redress proposals. Everything you need to know. pic.twitter.com/VeAson0LtT
— Martin Lewis (@MartinSLewis) October 7, 2025
The figure rises to £9.7 billion if all eligible consumers are compensated, which it said was very unlikely.
The FCA had previously estimated lenders could foot a bill totalling between £9 billion and £18 billion.
It also said before that drivers could receive less than £950 in compensation per motor finance deal, but it has now confirmed payouts are likely to average at about £700.
Some four million car finance deals are estimated to have already been subject to a complaint – leaving around ten million which still could be raised.
Consumers could have had more than one car loan that is eligible for compensation.
Motor finance firms broke the law or its rules by not properly informing customers about commission paid by lenders to the car dealers that sold them the loan, the regulator said.
This meant that many motorists did not have the opportunity to negotiate or find a better deal and therefore may have paid a higher interest rate for their loan.
The watchdog has been looking into data from across some 32 million agreements made between 2007 and 2024.
About 44% of those will be considered unfair and will qualify for compensation under the FCA’s proposals.
It believes setting up a free compensation scheme will make it easier for customers to access, and more cost-effective for firms by removing many of the legal and administrative work.
The proposals come after a Supreme Court ruled in August that lenders were not liable for hidden commission payments on car finance agreements.
Nikhil Rathi, the FCA’s chief executive, said: “Many motor finance lenders did not comply with the law or the rules.
“Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.
“We recognise that there will be a wide range of views on the scheme, its scope, timeframe and how compensation is calculated.
“On such a complex issue, not everyone will get everything they would like.
“But we want to work together on the best possible scheme and draw a line under this issue quickly.
“That certainty is vital, so a trusted motor finance market can continue to serve millions of families every year.”
Most of the car finance deals covered by the scheme involve so-called discretionary commission arrangements (DCAs).
This refers to arrangements whereby brokers, including car dealers, were able to increase interest rates on car loans so they could get more commission.
The FCA advises any consumer who thinks they may be eligible for compensation to contact their lender or broker if they haven’t already done so.
Lenders will have three months from the date of the scheme launching, set to be early next year, to contact those customers who have already complained – and six months to reach out to those who have not.
Mr Rathi said: “We’re expecting all lenders to make reasonable efforts to contact their customers that may be eligible and may be affected, so we certainly hope they’ll be able to reach as broad a group as possible within the time frames that we set out.
“If somebody is not contacted, they will have one year from the date of the start of the scheme to make a complaint to their lender.”
“We absolutely want this issue dealt with, and we want it dealt with at pace,” he added.
“We believe if that can be achieved then we can ensure that some of the trust and confidence in the market can be repaired.”
The FCA said its scheme is focused on about 30 lenders who make up around 89% of the motor finance market.
The watchdog has repeatedly warned consumers that they do not need to use a claims management company (CMC) or a law firm to access its compensation scheme, and could be subject to unnecessary fees if they do.
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