You may remember headlines from last year about the car finance mis-selling scandal, which was tipped to become ‘the new PPI’. At the centre of the issue are discretionary commission arrangements (DCAs) – where dealers and brokers applied inflated interest rates to car finance deals in exchange for higher commission.

Although these practices were banned back in January 2021, millions of customers may have unknowingly paid over the odds – and could now be owed compensation.

Since the scandal first came to light, things have moved on significantly. The FCA concluded its investigation last September and confirmed that there was widespread evidence of poor practice in the way some lenders and brokers handled car finance agreements.

Then in October, the Court of Appeal ruled that anyone sold car finance without being fully informed of any commission should be due compensation. This was unexpected and could mean many payouts for many more people, not just those whose finance agreements included hidden DCAs.

However this is now subject to a Supreme Court appeal, which was heard earlier this month. The likely outcome is that only customers whose deals involved DCAs will be due compensation after all – about 40% of all agreements.

The other big news is that the FCA has confirmed it is now working on a potential compensation scheme, similar to the PPI redress process. Final details are expected to be confirmed in mid-2025, after we hear the outcome of the Supreme Court case.

A redress scheme would mean lenders have to identify and contact those affected, rather than relying on the customers themselves to complain. This is good news and will mean people are less likely to miss out if they didn’t know they were affected, or haven’t complained for some other reason.

However I would still urge affected customers to get a complaint in, if you haven’t already, so you’re in the system ready for when a compensation scheme is agreed and don’t have to wait to be contacted.

Complain directly to the lender, not the dealer, and do it yourself rather than using a fee-charging claims management company.

You can do this if you are still making repayments, or if your finance agreement ended within the last six years.

It’s possible older agreements could be included in a future redress scheme, so it’s worth complaining anyway.

You can also make a claim on behalf of someone who has since passed away.

You could be due compensation if you took out a personal contract purchase (PCP) agreement before 28 January 2021, but personal contract hire (PCH) deals are not included.

You also won’t be able to claim if the car was primarily for business use, or if you had interest-free finance.

A growing number of lenders have confirmed they have never used discretionary commission arrangements, so it’s worth checking yours before making a complaint.

If you can’t remember who your lender was, you can check your credit report for free and then contact the lender to ask for a copy of the agreement.

This is a fast-moving issue and one of the biggest potential financial scandals in years. If you had car finance before 2021, it’s well worth checking whether you could be due money back.