Martin Lewis reveals who is entitled to car finance compensation and how much they’ll get

The money saving man is back

The money saving man is back fighting the good cause and getting people their hard-earned cash back into their pockets as he says motorists who were mis-sold car finance could be liable to hundreds of pounds in compensation.

The MoneySavingExpert founder believes that it is "very likely" that around 40% of Britons who entered personal contact purchase or hire purchase agreements between 2007 and 2021 will be eligible for payouts.

Sky News reported that brokers and dealers charged higher levels of interest during this period without telling consumers in "discretionary commission arrangements".

Speaking to Sky News Radio, Lewis said: "Very rarely will it be thousands of pounds unless you have more than one car finance deal.

"So up to about a maximum of £950 per car finance deal where you are due compensation."

He advised that anyone who believes they are entitled to compensation should check by writing to their car finance company while also advising to avoid using a claims firm.

Lewis said: "They're hardly going to do anything for you and you might get the money paid to you automatically anyway, in which case you're giving them 30% for nothing."

The Financial Conduct Authority said yesterday, after a review, that the past use of motor finance "has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers".

Their statement noted that those affected "should be appropriately compensated in an orderly, consistent and efficient way".

Lewis said that the consultation with launch in October and will last six weeks.

He said: "We expect payouts to come in 2026, assuming this will happen and it's very likely to happen.

"As for exactly how will work, it hasn't decided yet. Firms will have to contact people, although there is an issue about them having destroyed some of the data for older claims."

He believes claims will either be paid automatically, or affected consumers will need to opt in and apply to get compensation back.

The FCA has estimated that the compensation and administrative costs of the scheme could total between £9bn and £18bn.

Stephen Haddrill, director general of the industry body the Finance and Leasing Association, said: "We have concerns about whether it is possible to have a fair redress scheme that goes back to 2007 when firms have not been required to hold such dated information, and the evidence base will be patchy at best.

"We will be interested to see how the FCA addresses this point in its consultation."

Lloyds, the UK listed bank most exposed to the motor finance issue, has previously set aside £1.2bn to cover compensation in such a scenario.

It said on Monday: "After initial assessment of the Supreme Court judgment, and pending resolution of the outstanding uncertainties, in particular the FCA redress scheme, the Group currently believes that if there is any change to the provision it is unlikely to be material in the context of the Group.

"The provision will continue to be reviewed for any further information that becomes available, with an update provided as and when necessary."