Martin Lewis has outlined the three ways drivers may be eligible for compensation over mis-sold car finance deals. 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 today.

Mr Lewis explained that under the new scheme, drivers must meet at least one of three criteria, all linked to undisclosed arrangements between lenders and brokers. “There are three categories of car finance mis-selling included in the FCA’s scheme. All of them rely on non-disclosure – in other words, you weren’t told this was going on. That means there’s no way to know you were mis-sold without checking,” he said. The finance expert noted that drivers may have been mis-sold the agreements under more than one of the categories.

Discretionary commission arrangements (DCA)

This happened when the broker or dealer could increase the interest rate to earn more commission under agreements that charged a variable interest rate.

“This has been our focus for two years, so if you’ve already complained, it’s likely what you complained about,” the Money Saving Expert website said.

This impacted around 11.4 million agreements, either Personal Contract Purchase (PCP) or Hire Purchase (HP), taken out between April 6, 2007, and January 27, 2021. DCAs were banned on January 28 2021.

Contractual ties

The next eligibility criteria concerns around 3.2 million agreements. This happened when brokers failed to disclose they were working exclusively with a single lender, or gave one lender first refusal.

Brokers may have claimed to search the whole market to give their customers the best deal, while in reality, they prioritised one lender.

However, the FCA has tightened the criteria since the proposal stage, meaning that if the lender can prove there were visible links with the manufacturer and dealer, you would not be eligible for compensation.

High commission

To meet the criteria, the commission must have been 39% or more of the total cost of credit and 10% or more of the loan amount. “If both those things add up and you didn’t know about it, it was an unfair arrangement,” explained. MSE.

This affected 2.9 million agreements, which will be less than previously thought, since the qualifying amount was 35% in the proposal stage of the redress scheme.

How to get paid

If you have already complained, you will be notified of any compensation owed within three months of the implementation period ending.

The implementation period will last three months in the majority of cases, and could rise to five months for older agreements. You will be asked if you want to accept they money and then paid by the end of 2026.

Motorists who have not yet complained have been urged by Alex Neill, co-founder of consumer rights group Consumer Voice, to do so now.

“Our advice to drivers is don’t wait, complain now. Lenders are supposed to contact you but there are pitfalls associated with waiting. Complaining now is really important because it could mean you get your compensation sooner.

“Be cautious of unexpected calls, texts or emails offering guaranteed compensation. There are scams and unscrupulous firms already operating and this is only set to get worse.”