Millions of motorists who are eligible for compensation in the car finance scandal could find it impossible to claim, a Money Mail investigation has found.
The Financial Conduct Authority (FCA) unveiled a car loans compensation scheme last week after it found that lenders broke the law by failing to tell customers key information about commission payments pocketed by salesmen.
The regulator said that there are 14.2 million cases where motorists should receive a typical payout of £700.
But Money Mail has discovered that mis-selling victims may not get the money they are due as they no longer have the paperwork for their loans.
We spoke to 100 readers who thought they may be eligible for financial redress having taken out car loans over the past two decades.
Of these, just seven still had the paperwork that lenders told Money Mail they wanted to see to assess the claim.
If that picture is replicated across the country, it suggests that millions of customers are likely to struggle to submit claims.
The regulator says car loans taken out as long ago as 2007 – or 18 years ago – are eligible for claims under the redress scheme.
Yet most customers will have handed their cars back at the end of the loan term – often three or five years.
Understandably, few households hold on to paperwork for financial products they no longer own and may have thrown away crucial documents.
The commissions were so well hidden that it’s only in the past few years – as the scale of the mis-selling has become clear – that car loan customers have become aware that they may have been mistreated.
Our investigation found that even those who have held on to old paperwork are unlikely to find any reference to commission in the car loan documents.
In the contracts that we scrutinised, the word ‘commission’ was not mentioned in 40 per cent of cases.
One customer provided 77 pages of paperwork relating to a single loan, with mention of these backhanders buried in the small print.
In fact, millions of car loan customers unwittingly paid commission to car dealership salesmen through higher interest borrowing charges.
The commission was an incentive from the lender to the dealer to sign up customers to loans. The FCA says that of the 32.5 million cases where people were sold motor finance agreements between 2007 and 2024, 44 per cent of them were ‘unfair’ sales.
Motorists who think they may have been affected have been told to make a complaint.
Crucially, though, this must be submitted against the lender, not the car manufacturer or the dealership that sold the car.
However, many motorists will struggle to remember who their lender was – especially if they did not shop around to find a loan and just took one out through the dealership where they bought their car.
Often, this is included in paperwork small print, with dealers using their own branding for finance arrangements.
For motorists who cannot locate the paperwork, there is no simple way of verifying who your lender was.
The regulator says: ‘If consumers don’t know who their lender was, there’s information on how to check on the FCA website.’
But the webpage it directs motorists to does not include a comprehensive database of lenders.
Instead, it gives a few tips that require motorists to do further digging. These include ‘check old bank statements’ – difficult unless you’ve kept a paper file going back many years – ‘contact the dealer where you got the car’ and ‘if your agreement was active in the past six years, you can also try checking your credit file’.
Worryingly, Money Mail’s investigation found many independent dealerships have gone out of business since loans were originally issued.
In four of the seven cases where readers had kept the correct documentation for their loans, the dealership where they bought the car had closed down.
When we called one of the dealerships still in business, we were told to ‘speak to the salesperson who [the customer] dealt with’ – only to discover that person had since left the company.
In another case, the dealership failed to reply to our phone calls and emails requesting help locating the correct paperwork for one of our readers.
For car loan customers who do remember the name of their lender, the FCA is providing a ‘template complaint letter’ to hand to the finance provider.
This should be straightforward to complete, requiring personal details and information about when and where the car was purchased.
However, it is unclear whether this will ultimately result in a payout. When Money Mail contacted lenders to ask them to look into our readers’ loans, we were frequently told they couldn’t do anything without the policy agreement numbers on the original paperwork.
Motorists need to get the ball rolling now on their compensation claims.
So far, an estimated four million complaints have been made, out of the 32.5 million finance agreements since 2007 – so just over 12 per cent of all potential cases.
The FCA says lenders will proactively try to contact customers – but this is no failsafe route to compensation.
It states: ‘Consumers who have not complained when the scheme starts [late 2026] would be contacted within six months, where lenders can identify them, and asked if they would like to opt in.’
This means the regulator is heavily relying on the industry to search for victims to pay.
The regulator has also provided wriggle room for lenders to weasel out of payouts. ‘We propose enabling lenders to rebut the presumption of unfairness in some limited circumstances,’ it says.
These circumstances include ‘evidence of adequate disclosure’ and where ‘the consumer was sufficiently sophisticated’ to understand how commission deals work.
It will be up to lenders to check the small print of contracts and ascertain if any of the FCA rules were broken.
But the opacity of contracts could make it hard for customers to challenge them. Before the announcement by the FCA last week, it was believed only customers with discretionary commission arrangements (DCAs) would be entitled to any payouts.
These are where the interest rate charged is variable and can be increased in order for the broker or dealer to get more commission.
In one case Money Mail investigated before the announcement, we were told categorically that it was not a DCA, giving the customer the impression they would not qualify and had no reason to hang on to paperwork.
But now the FCA has added to the list of eligibility criteria those who paid ‘high commission’ when borrowing money ‘where the commission is equal to or greater than 35 per cent of the total cost of credit and 10 per cent of the loan’ amount. Working out if you fit this category is all but impossible.
There was no mention of the size of commission in the paperwork of any of the cases taken on by Money Mail in our investigation – even in the limited cases where the term ‘commission’ was mentioned in the contract.
The regulator has also stated that compensation may be due in cases where ‘contractual ties gave a lender exclusivity or a right of first refusal’.
In other words, where the dealership offered car finance from only one specific provider.
The FCA says ‘transparency of such ties is critical to fairness’ and ‘disclosure could have meant that consumers were more likely to shop around, increasing competitive pressures and potentially leading to lowering borrowing costs’.
The contracts we analysed did not make it clear whether there were any ‘contractual ties’ between the dealerships and lenders.
Customers who approach lenders to gather this type of information face a long battle.
Before the FCA announcement last week, we found it typically took at least three weeks of correspondence between borrowers, lenders and car dealerships for us to get a response – let alone garner information on whether or not compensation would be due.
When we called Black Horse, part of Lloyds Banking Group, an automated voice said: ‘Our telephony colleagues are here to help customers with additional needs . . . and customers who can’t access our online services.’
We waited 20 minutes to be put through to a real person – just to log a complaint.
With Santander Consumer Finance, you chose from six options and after 20 minutes calls were still not answered.
Vauxhall Finance had seven options and never replied to our requests for help. Honda Finance took two months to provide a reply.
Nissan Financial Services responded that it ‘absolutely’ could help with commission enquiries, but no information was forthcoming.
When Money Mail tried again to contact lenders after the latest FCA announcement, we hit the same brick wall – with lenders now using the FCA probe as an excuse to bat away queries.
The regulator has provided clarity by estimating that consumers will be ‘compensated an average of around £700 per agreement’.
The FCA estimates that, for DCAs, borrowers may typically receive £518, for tie-in contracts £527 and for big commission deals £960. It says the worst cases could lead to payouts worth £2,400.
However, it admits that a ‘hybrid remedy’ may ultimately be adopted to calculate payouts – based on the difference between estimated loss to the individual and commission paid to the salesman.
This could involve lenders using an ‘estimate’ of how much customers overpaid or lost. The lender would then add interest to calculate the overall redress amount.
Yet without the information about their loans and commission payments, claimants will find it difficult to challenge lenders’ calculations.
Hinting of calculation challenges, the FCA admits ‘estimates remain highly indicative and susceptible to change’ and ‘many firms have raised the possibility of highly automated approaches to paying compensation’.
The scheme to compensate motor finance victims is expected to start at the end of 2026 – but payouts could still take many years to arrive in customer bank accounts.
The FCA says: ‘Lenders will need to contact consumers who have already complained within three months of the scheme starting. Consumers who have not already complained would be contacted within six months.’
Potential victims not contacted by lenders have just 12 months after the scheme start date to demand compensation. If they miss the deadline, they get nothing.
This makes it even more crucial that customers have the documents and information they need to submit a claim.
The industry wants to draw a line under the scandal as soon as possible with the minimum of fuss.
There has been no strict rule set on when people should get paid – the FCA has only said ‘we expect firms to resolve promptly those complaints they already have’.
The FCA says: ‘We are still at the consultation stage. You do not need the paperwork to make a complaint but you do need details that identify your agreement.’
