Treasury answers parliamentary question on mis-sold car finance compensation

The Treasury said on 8 September 2025 that it is working with the Financial Conduct Authority and the Prudential Regulation Authority to understand the impact of the Supreme Court judgment on motor finance commission practices, for both firms and consumers¹. The answer, given by Lucy Rigby, Labour MP for Northampton North, responded to a written question tabled on 29 August 2025 by Richard Tice, Reform UK MP for Boston and Skegness, who asked whether the Chancellor would hold discussions with the FCA on steps to ensure all consumers mis-sold car finance are fully compensated¹.

The government's answer states that the Supreme Court has now clarified the law on commission practices in the motor finance sector, and that it respects that judgment¹. It also notes the FCA's recent statement that it will consult on a consumer redress scheme in October¹. The FCA proposes that the scheme covers discretionary commission arrangements, described in the answer as a practice banned in 2021 that allowed dealers to vary interest rates for higher commissions¹. The FCA will also consult on which non-discretionary commission agreements should be included¹.

The answer does not set out a compensation timetable, eligibility criteria or estimated amounts, and no figures for affected consumers or firms appear in it¹. The Treasury did not say in the answer whether it will hold the discussions with the FCA that the question asked about; it said it is working closely with the FCA and PRA¹. The scope of any scheme, including which non-discretionary agreements fall within it, is to be the subject of the FCA's consultation rather than settled in the answer¹.

Why it matters for households

People who bought a car on finance, particularly where a discretionary commission arrangement was used, are the group the proposed scheme would concern. Discretionary commission arrangements let dealers vary the interest rate on a finance agreement to earn higher commission, and were banned in 2021¹. The government's answer confirms that the FCA intends to consult in October on a scheme covering those arrangements, and will also consult on which non-discretionary commission agreements should be included¹. Until that consultation is published, the categories of agreement in scope, the eligibility rules and any payment amounts remain unstated in the parliamentary answer¹. The answer also confirms the government is examining the impact on firms as well as consumers, which bears on how any redress would be funded¹. For background on how industry-wide compensation exercises work, see FCA redress schemes, and for the specific commission issue, see the motor finance redress scheme. Households wanting to know which lender is involved in an agreement can check car finance companies.

What happens next

The FCA is due to consult on a consumer redress scheme in October, according to the government's answer¹. The consultation is expected to cover discretionary commission arrangements and to address which non-discretionary commission agreements should be included¹. No date has been given in the answer for the consultation's close, for a final scheme or for any payments¹.