Supreme Court to decide if millions of car finance customers are owed compensation
Some car dealers were getting bigger commissions when they signed buyers to higher interest rate deals, known as 'discretionary commissions'.
Last year, the Court of Appeal ruled that these undisclosed commissions were unlawful.
On Friday afternoon, the UK's highest court will give a judgement affecting millions of car buyers, in what could be the biggest consumer compensation case since PPI.
The payment protection insurance (PPI) scandal saw people sold insurance they had not asked for or did not need on a wide scale.
In January 2021, the Financial Conduct Authority banned motor loan commissions that increased when customers paid more interest.
Friday's judgement is in response to an appeal brought by lenders who say they applied rules that existed at the time.
If the UK's Financial Conduct Authority concludes that customers have lost out from widespread failings by firms, it could set up an industry-wide redress scheme.
It's estimated 31 million car loan agreements are affected with potential compensation up to £30bn.
The Financial Conduct Authority estimates 99% of finance deals had a commission model, and 40% had the 'discretionary commission arrangements' or DCAs.
The issues affect those who bought any kind of vehicle on finance before January 28, 2021. This includes hire purchase and PCP (Personal Contract Purchases) schemes.
Any compensation scheme is likely to apply to deals taken out after April 6, 2007, when the Financial Ombudsman took over jurisdiction of motor finance complaints.
Money Saving Expert Martin Lewis has said there's no need to use a claims management firm to log a complaint if you think you've affected by DCAs. Such a firm is likely to take a cut of any money you're due.
You can use Money Saving Expert's free tool to ask if you had a DCA and log a complaint.
Lloyds Banking Group was the first UK bank to set aside millions of pounds in preparation.
The bank was exposed through its Black Horse business, which offers finance for new and used vehicles through 4,500 dealers across the UK.
The bank has said it has put aside £1.2bn to cover potential costs and compensation.
Santander said it had put aside £295m as a provision to cover potential payouts as well as legal costs.
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