Martin Lewis says motorists who were mis-sold car finance are likely to receive “hundreds, not thousands of pounds” – with regulators launching a consultation on a new compensation scheme.
The founder of MoneySavingExpert.com believes it is “very likely” that about 40% of Britons who entered personal contact purchase or hire purchase agreements between 2007 and 2021 will be eligible for payouts.
“Discretionary commission arrangements” saw brokers and dealers charge higher levels of interest so they could receive more commission, without telling consumers.
Speaking to Sky News Radio’s Faye Rowlands, 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.”
Lewis explained that consumers who believe they may have been affected should check whether they had a discretionary commission arrangement by writing to their car finance company.
However, the personal finance guru warned against using a claims firm.
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“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,” he added.
Read more: How to tell if you’ve been mis-sold car finance
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Yesterday, the Financial Conduct Authority said its review of 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”.
The FCA’s statement added that those affected “should be appropriately compensated in an orderly, consistent and efficient way”.
Lewis told Sky News that the consultation will launch in October – and will take six weeks.
“We expect payouts to come in 2026, assuming this will happen and it’s very likely to happen,” he said.
“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.
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The FCA says you may be affected if you bought a car under a finance scheme, including hire purchase agreements, before 28 January 2021.
Anyone who has already complained does not need to do anything.
The authority added: “Consumers concerned that they were not told about commission, and who think they may have paid too much for the finance, should complain now”.
Its website advises drivers to complain to their finance provider first.
If you’re unhappy with the response, you can then contact the Financial Ombudsman.
Any compensation scheme will be easy to participate in, without drivers needing to use a claims management company or law firm.
The FCA has warned motorists that doing so could end up costing you 30% of any compensation in fees.
The FCA estimates the cost of any scheme – including compensation and administrative costs – to be no lower than £9bn.
But in a video on X, Lewis said that millions of people are likely to be due a share of up to £18bn.
The regulator’s announcement comes after the Supreme Court ruled on a separate, but similar, case on Friday.
