The consumer champion Martin Lewis suggests the row "has the potential to shake up more than just car finance".
So what has happened and could you be entitled to a payout?
How did we get here?
In January, the FCA launched an investigation into discretionary commission arrangements (DCAs) on car loans issued between 2007 and 2021. The practice meant car dealerships and brokers had the power to set interest rates on loans, and earn higher commission along the way. DCAs were banned by the FCA in 2021 because of concerns they were incentivising dealers to charge higher interest rates.
The City regulator's investigation could lead to a multibillion-pound compensation scheme funded by the lenders that sat behind the arrangements. The FCA has already warned car lenders to hold back cash for potential payouts, which some analysts believe could add up to £8bn-£13bn.
The watchdog had been due to issue its decision in September, but pushed its deadline to the end of May 2025 after lenders struggled to provide all the data in time. But that delay also gave it time to judge the outcome of a test case against the specialist lenders Close Brothers and FirstRand Bank.
What happened last week?
Last Friday, the court of appeal ruled on that test case, with the judges upholding a decision that it was unlawful for the two lenders to have paid a "secret" commission to car dealers without borrowers' knowledge.
The judges said consumers needed to know all the material facts that could affect their borrowing decision, including the total commission to car dealers and how it was calculated, in order to be able to consent to the loan.
Some lawyers have speculated that customers could collectively receive billions of pounds in compensation as a result, and in some cases could have their car loan written off or rescinded.
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