Motorists who bought a car, van, campervan or motorbike between April 2007 and January 28 2021 could be eligible for thousands of pounds.
MoneySavingExpert’s (MSE) Martin Lewis has urged people to act quickly to avoid missing out on the compensation.
This comes amid an ongoing ‘major investigation’ from the Financial Conduct Authority (FCA) into hidden, unfair car finance commission.
The FCA is exploring whether customers have been overcharged on interest for loans. This investigation could end up handing billions of pounds of overcharged interest paid back to millions of people.
Mr Lewis has told drivers who bought their vehicle on Personal Contract Purchase (PCP) and Hire Purchase (HP) – but not leasing – to act “soon” to pocket the money.
While the investigation may not be completed until May 2025, the MSE founder said it was crucial to log your complaint soon.
He said that the FCA will “likely” set up some type of mass-scale redress scheme next May, but added that a “time bar” may be introduced when the investigation is over, preventing some people from claiming back after a certain period.
Claims can be made on behalf of someone who has passed away, or for a vehicle no longer in your possession.
Explaining the reason behind the huge payouts, MSE said: “In about 40 percent of car finance deals, there were hidden ‘discretionary commission arrangements’ (DCA). This is where lenders allowed brokers & car dealers to up the interest to increase their commission – so you overpaid, without knowing.”
These DCAs incentivised brokers to increase the amount customers were charged for their loans.
The FCA banned the DCA practice in 2021, but customers have since complained about how much they were charged before the ban.
Many customers were not told about the practice, and many – who thought it was a fixed price – did not negotiate on the DCA.
Before applying, the potential compensation only applies to vehicles used for personal use and commuting, while business cars and static caravans are not included.
The MSE has offered people an easy online tool to check if they are eligible to complain and attempt to claim compensation.
So far, the FCA have set December 2025 as the date by which firms must have dealt with complaints.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “We are taking a closer look at historical discretionary commission arrangements in the motor finance market following a high number of complaints from customers, which are being rejected by firms.
“If we find widespread misconduct, we will act to make sure people are compensated in an orderly, consistent and efficient way.
