Treasury intervenes in car finance scandal

Banks could be protected from a potential £30bn compensation bill linked to car finance mis-selling.

The Treasury has asked the supreme court if it can act, following concerns that the case could make car loans more expensive and harder to get.

The request comes after three people sued money lenders, claiming they were kept in the dark about 'secret' commission payments made to car dealers.

According to reports, insiders suggest the Treasury is aiming to stop lenders from abandoning the market.

If too many claims flood in, it could lead to lenders pulling out of the market, leaving consumers high and dry.

What’s the car finance mis-selling scandal?

The case, first ruled on in October, revealed that many motorists were unaware of dealer commissions linked to their loans.

It exposed how car loans were often pushed onto unsuspecting buyers, with some dealers earning more for loans with higher interest rates (called ‘discretionary commission agreements’ or DCAs).

Lenders fear ‘massive payouts’

Two major lenders – FirstRand Bank, trading as MotoNovo, and Close Brothers – are appealing the ruling.

Finance firms could face massive payouts if the judgment stands.

Estimates from financial services firm Moody’s suggest the payout bill could reach £30bn.

What happens next?

The Treasury will only be allowed to step in if supreme court judges say the intervention will be of ‘significant assistance’.

A spokesperson said the government wants to see “a fair and proportionate judgment” that balances compensation payouts with a continuing car finance sector.

The appeal won’t be heard until April – we’ll know more about the implications the Treasury’s request will have on motorists then.

Think you were mis-sold car finance?

If you’re concerned you might have paid too much for your car finance because you weren’t told about commission, follow the steps outlined in this blog to complain.

Complaints can be submitted until 4 December 2025 – it’s free to do and you might get some money back.