Third of drivers unaware they could be due compensation in commissions probe

A third (34%) of drivers are unaware they may be entitled to compensation due to historic discretionary commission arrangements (DCAs), according to a new survey by direct-to-consumer online lender Carmoola.

The survey follows the Financial Conduct Authority (FCA) investigation into DCAs and the October 25 landmark judgment by the Court of Appeal which raised significant questions about the legality of undisclosed "secret" commissions agreed between car dealers and finance companies.

The car loan providers Close Brothers and FirstRand - the owner of MotoNovo – which was at the centre of an unsuccessful appeal had challenged earlier court rulings that had found in favour of the consumer. Those lenders are now appealing in the Supreme Court and livestreamed hearing will take place April 1-3.

The survey found that around 15% of potentially eligible claimants were completely unaware they could make a claim. Over half of eligible respondents (52%) thought fair compensation should be equivalent to the commission paid to dealerships when arranging their loan. Additionally, 37% of drivers were unaware that dealerships can receive commission when arranging car finance.

According to the Finance and Leasing Association (FLA), two million customers entered car finance agreements between September 2023 and September 2024, totalling approximately £38.8 billion in loans.

The survey also revealed that despite 66% of drivers knowing that mis-sold car finance customers could receive compensation, only 60% of those who obtained finance through a dealership have checked their eligibility to claim. Notably, 15% of potentially eligible claimants were completely unaware of their rights.

Consumer sentiment on claiming compensation varied with 27% saying they would file a claim if the process were simple, while 24% would only claim if the payout was substantial and 16% saying they would not claim at all.

Views on fair compensation were equally divided with 52% of eligible claimants believing they should receive the dealership’s commission amount as compensation, 17% feel their remaining loan balance should be paid off while 14% would accept any form of financial reimbursement, while 12% believe they should be refunded for the full loan amount.

The survey also explored public awareness of the UK Court of Appeal ruling, which mandates that customers must be informed if a commission is paid when arranging a car finance loan. The results show widespread confusion.

Thirty-seven per cent of UK drivers did not know that dealerships and brokers receive commissions when arranging car finance. Among those who have had a car finance agreement, 44% were unaware that a commission had been involved while 6% could not recall if they had been informed about commissions.

Aidan Rushby, founder and CEO of Carmoola, commenting on the findings, said: “The use of unfair commission arrangements in the past, where lenders incentivised dealerships to unnecessarily inflate a customer’s interest rates, has put the car finance industry under well-deserved scrutiny.

“Dealerships aren’t the ‘bad guys’ here – it’s the old-school lenders who encouraged these practices to boost revenues. They failed to prioritise customer interests, which has eroded trust in the sector.

“More and more consumers are choosing to secure their finance before visiting a dealership, opting for direct-to-lender solutions like Carmoola, where no commission is paid to middlemen. This approach allows buyers to enter dealerships with confidence and control, negotiating as a cash buyer would.”