The UK car finance industry stands at a defining crossroads.
Following the Financial Conduct Authority’s (FCA) findings into historic mis-selling, analysts estimate that lenders and motor finance providers could face up to £11 billion in compensation and administrative costs.
According to The Financial Times and Reuters, this includes £8.2 billion in direct compensation and £2.8 billion in handling and operational costs. The FCA’s consultation on a consumer redress scheme is now open, with payouts expected to begin in 2026.
At stake is not just financial liability but the credibility and consumer trust that underpin the UK’s entire motor finance sector.
The FCA’s review covers car finance agreements issued between 2007 and 2024, totalling around 14.2 million loans. The average payout per affected consumer is expected to be roughly £700.
The issue is not fraudulent lending — but commission and disclosure structures that incentivised unfair outcomes. Three key practices are at the heart of the scandal:
Together, these practices damaged consumer trust and exposed weaknesses in governance and oversight.
The FCA estimates that captive lenders, the finance arms of major car manufacturers, could bear almost half of total redress costs, with the remainder shared among high-street banks and specialist lenders.
Several institutions, including major UK banks and finance houses, have already set aside billions in provisions, warning that additional charges may follow. The FCA has stated that while consumers must be compensated fairly, the redress process should not destabilise the industry.
This episode is now seen as the largest consumer-finance redress event since the PPI scandal, which cost UK banks tens of billions.
In this £11 billion reckoning, words alone are not enough.
Every lender, broker, and dealer network must now prove integrity, transparency, and compliance at every stage of the finance journey.
That’s where Serve Legal’s Financial Compliance Audits play a vital role.
We provide independent, evidence-based testing that helps finance providers demonstrate responsible conduct before the FCA — and before their customers lose trust.
Our trained auditors simulate real-world finance journeys, online, in-branch, over the phone, and on the forecourt, to reveal exactly how products are sold and communicated in practice.
For financial institutions, compliance today is about proving integrity, not just avoiding fines. Serve Legal’s independent audits help organisations address the industry’s most pressing post-FCA challenges:
Serve Legal offers practical assurance in a sector under pressure — helping firms evidence responsible behaviour, strengthen governance, and rebuild public confidence.
Poor financial compliance isn’t a technical failure — it’s a breach of trust.
Unclear disclosures, inconsistent rates, or overly aggressive sales tactics can damage reputations and invite scrutiny.
Serve Legal’s Financial Compliance Audits give lenders and dealers the tools to:
In a multi-billion-pound redress landscape, proactive compliance is the new competitive advantage.
Those who can prove fairness and transparency will lead the industry’s recovery — and set a new benchmark for responsible finance.
Serve Legal is the UK’s leading provider of independent compliance testing and audit services.
Our Financial Compliance Division helps organisations across banking, retail, and motor finance ensure their products are fair, transparent, and FCA-ready.
Get in touch with our team to discuss how we can make a tangible difference in your workplace.