Martin Lewis has explained why two million UK drivers will not receive compensation for mis-sold car finance agreements, following a landmark ruling today.

Around 12.1 million drivers who were mis-sold car finance agreements between April 2007 and November 2024 will receive an average payout of £829, the Financial Conduct Authority (FCA) has confirmed. However, eligibility for compensation has been tightened. Around 14.2 million agreements were considered eligible for compensation at the consultation stage, so around two million drivers who believed they might be eligible will not receive the payout.

Under the new rules, you can only claim compensation if you weren’t told about certain arrangements between the lender and the broker. This includes where the commission was very high, at least 39% of the total cost of credit and 10% of the loan.

But the Money Saving Expert explained that agreements involving minimal commission or zero APRs will not receive redress.

He wrote on X: “Ok I’ve now seen the reason there are fewer agreements covered… (done at speed). 1) Agreements involving minimal commission or zero APRs will not receive redress (THE MIN COMMISSION BIT IS NEW).”

You will also be eligible for compensation if you were not informed of contractual ties that gave a lender exclusivity or a right of first refusal.

However, Mr Lewis said if the lender can prove there was a “visible link” with a manufacturer and dealer, you may not receive compensation.

He added: “Where a lender can prove there were visible links with a manufacturer and dealer, a contractual tie alone will not trigger compensation (this is big it looks like if you were missodl specifically due to contractual ties (not DCAs) and the finance dealer were linked with the lender eg VW selling VW finance) you’re not missold. I’ll explain more later.”

The third condition for compensation is if the broker did not tell you details of a discretionary commission arrangement (DCA), where they could adjust your interest rate to earn more commission.

Consumers generally have six years to make a claim, but the FCA confirmed this could be extended where information about commission or a link was deliberately concealed.

Speaking after the FCA’s announcement, CEO Nikhil Rathi said it will put £7.5 billion “into people’s pockets”.

He said the scheme was the “quickest, fairest, most cost effective way” for consumers to get compensation, and that it was “not especially likely” that consumers could receive more compensation if they took their claims to court.

Commenting on the announcement, Alex Neill, co-founder of consumer rights group Consumer Voice, said increased payouts come “at the expense of millions of other drivers who are now excluded altogether”.

“The FCA has narrowed eligibility and reduced the overall bill for lenders, raising real concerns that many people will still be undercompensated,” he said.

“Millions of people were overcharged, and our research shows some were pushed into real financial difficulty. This was the regulator’s chance to put that right, but it instead appears to have let lenders off the hook.”

He urged drivers to complain now, rather than waiting for lenders to contact them. “Complaining now is really important because it could mean you get your compensation sooner,” he urged.

Head of Banking at KPMG UK Peter Rothwell said it gave lenders and the market “greater clarity” on how the redress scheme will be put into action.

“With an initial start date of June 30 2026, lenders must now unpick the detail and move quickly from planning to execution,” he said.

Mr Lewis also explained that the FCA has “technically split car finance redress into two schemes”, with one for agreements starting 2007 to 2014, and another for agreements between 2014 to 2024.

“I suspect this is because the first group is most likely to face a judicial review, so by splitting it. If the first group is challenged, it allws them to continue with scheme for 2nd group while first is on hold,” he said.

Mr Rothwell said that while it could help to speed up the process for some consumers, it risked “causing confusion for others”.