UPDATE AUGUST 1ST 2025

At 4:35pm on August 1st, the UK Supreme Court ruled that motor dealers arranging car finance do not owe fiduciary or disinterested duties to customers, meaning undisclosed commissions are not automatically bribes or breaches of duty, though such deals can still be challenged under the Consumer Credit Act for unfairness.

We are awaiting the FCAs decision on next steps, and will update this blog when we know how this will affect opportunities for Contractors and Recruiters. In the meantime, read our bulletin, here.

You’ve no doubt seen the adverts from firms claiming that you may be owed compensation from lenders of car finance. It appears that not a day goes by without a new solicitor firm promoting their compensation eligibility checking service.

Indeed, from the prolificacy of these advertisements, it could seem as though car loan scandal complaints are the next PPI. And, with a ruling from the supreme court currently being awaited, it’s clear that that we’ve not heard the last of this high-profile case.

So, what has spurred this hive of activity around motor finance claims?

In this blog, we’ll explain the latest developments in the world of car finance compensation, what is yet to come, and how there could be a silver lining in the form of new opportunities for contractors in the professional services like you.

Car Finance Claims Scandal Explained: What are the Complaints About?

In a nutshell, the complaints relate to commission payments on loans based on the interest rate charged to the customer.

Known as ‘Discretionary Commission Arrangements’ (DCAs), these loans used a commission structure wherein the dealer or broker would receive a commission from the lender which was determined by the interest rate paid by the customer. Often, a lender would set an ‘acceptable range’ of interest rates, within which the dealer or broker could set the actual interest rate. 

For example, a lender could approve a loan application arranged by a dealer and set the interest rate at 5%. However, the dealer would then be given the option to increase the interest rate to 10%, without having to tell the customer that the lender was only going to charge 5%. The difference (or at least some of it) between the lender’s original rate and the final rate paid by the customer would then be paid to the dealer as commission. Therefore, the higher the interest rate, the more commission they’d get.

It’s fairly normal for a lender to pay commission to a broker for arranging an agreement. In fact, the Financial Conduct Authority (FCA) estimates 99% of agreements included commission. However, not all of them use the controversial DCA model, as they may instead use fixed rates or flat fees.

The FCA and Financial Ombudsman Service began investigating DCAs because their model incentivises dealers/brokers to raise interest rates, just to make more money at the customer’s cost. This created a conflict of interest, and could even encourage brokers to mis-sell finance. Furthermore, regulators took issue with the lack of transparency within such arrangements. Because the customer only agrees to the interest rate after the broker/dealer has adjusted it, they would have no knowledge that it has been changed at all. The fact that they could have been paying less, and that the broker/dealer is receiving commission, is hidden from them.

As a result, the FCA implemented a ban on DCAs in 2021, before announcing a further investigation in January 2024.

What is the Latest News on Motor Finance Claims & Redress Scheme?

At the time of writing, claimants and lenders are awaiting a decision from Supreme Court as to whether a Court of Appeal ruling made back in October 2024 will be upheld.

For context, the Court of Appeal ruled that brokers must inform, and gain consent from, borrowers before receiving commission from lenders. This meant that ANY commissions received without the customer knowing were unlawful, and would have led to a huge number of complaints, with compensation liabilities potentially reaching over £35billion. This is because it would impact almost all car finance agreements, not just DCAs.

Consequently, Close Brothers and MotoNovo launched an appeal against this ruling, which is the basis of the Supreme Court hearing, the outcome of which is expected to be announced in Summer 2025.

Here’s How it Could Go Down.

• Decision Upheld: If the Supreme Court upholds the Court of Appeal’s decision, a redress scheme for the entire car finance scheme would be needed. This would be a truly enormous clean-up operation – as mentioned previously it led to refunds to the tune of £35 billion.
• Decision Overturned: The Court of Appeal’s decision could be overturned, and is thought to be the more likely outcome. This wouldn’t mean that the whole situation would be swept under the rug, though. The FCA would likely plan a redress scheme solely for DCAs, which account for roughly 40% of car finance agreements.

Less likely is the possibility that the court will rule against all complaints including DCAs. In any case, the FCA will almost certainly look to tighten up its rulebook on motor finance commission models, regardless of how the redress scheme could look.

What is a Redress Scheme?

Rather than relying on customers bringing individual complaints, a redress scheme would mean the FCA would put the responsibility of identifying where customers have lost out, and compensating them appropriately, onto the lenders. Rather than investigating each complaint, the FCA would set the rules and ensure that firms are sticking to them, as they are obliged to. The FCA states they would favour this approach as it will take the onus off the customer and reduce the need for complaint management firms and solicitors.

Why Could the Car Finance Scandal Create Opportunities for Contractors?

Regardless of the outcome of the Supreme Court hearing, there’s going to be work for lenders, claims managers and regulators to do. Lenders have been setting aside millions to account for the potential costs they might face, but that’s not just for compensation payments. There’s also likely to be significant staffing requirements to assist with the increased workload.

“Banks have put millions away to cover this likely cost – similar to the PPI scandal situation. Contractors could be drafted in to help facilitate fund recovery from lenders”

Michael Howard, Head of Sales

And, because a lot of the work will relate to preparing for, and administering the redress scheme, many of the roles could be temporary. Even better, the urgency and high volume involved could mean firms are willing to offer premium daily rates, particularly for niche skillsets.

So, if you’re a contractor, you could be in big demand very soon. Here’s some of the roles that may see increased positions off the back of the motor finance scandal redress.

Data Analysts

As firms will be responsible for assessing whether customers are entitled to compensation, they’re going to need to get digging through their filing cabinets. This will involve collecting all the necessary data to inform – and prove – their findings, cleansing and structuring it, and finally, analysing it.

This is only compounded by the fact that claims dating back years may be within scope, so data from legacy sources will also need to be collated. Furthermore, there’s a good chance that lenders weren’t originally planning on using this data in the way they will now have to, so there will be a fair bit of assessing the quality, consistency, accuracy, and validity of the data they use. Moreover, if gaps are discovered, efforts will need to be made to fill them.

As a result, lenders or consultancies may well seek jobs such as:

• Data Scientist
• Data Analyst
• Data Architect
• Data Engineer
• Data Consultant
• Data Manager
• Database Administrator
• Data Visualisation Specialist

Customer Service & Complaints Handling

A requirement of the redress scheme is that firms must contact affected customers proactively, rather than waiting for them to bring a complaint. As a result, there will be increased customer interaction, and therefore a need for more customer service representatives and complaints handlers.

Duties would potentially include taking inbound calls on a helpdesk, explaining the process to customers, updating them on case progress, and liaising with internal team members.

Job roles could include:

• Complaint Handler
• Complaints Officer
• Helpdesk Agent
• Customer Service Manager
• Customer Experience Consultant
• Customer Service Adviser
• Complaints Specialist

Financial Consultants & Risk Managers

No matter which way they cut it, the firms implicated in this scandal are going to take a blow to their finances. Establishing the scale of this though will require consultation from financial analysts and business advisers. These consultants may also be needed to ensure the redress can be carried out as sustainably as possible, advising on what funds should be allocated and set aside for it.

Furthermore, their financial resilience could be hit as a result, so risk assessors could be brought in to advise the lenders on their exposure to future financial risks.

Contractors with these job roles may see higher demand:

• Risk Analyst
• Financial Modeller
• Business Adviser
• Financial Analyst
• Risk Modelling Consultant
• Loss Control Consultant
• Credit Analyst
• Risk Manager

I.T, Digital & Automation

Complying with the requirements of the redress scheme will put additional pressures on the systems, software and processes of the implicated organisations. Platforms such as CRMs will likely need adapting to ensure redress can be administered orderly and correctly, or whole new platforms will need developing. Furthermore, some firms may opt for a ‘short term pain for long term gain’ solution, investing in advanced technologies, such as machine learning and Artificial Intelligence to automate tasks and streamline workflows, allowing staff to cope with demand.

All of the above will require quality control and testing, to ensure systems work as expected, are efficient, and comply with regulatory requirements.

With all this upheaval, transfer and processing of data firms will need to do, the need for watertight cybersecurity will be greater than ever, lest firms could risk of having an even bigger (and costlier) mess on their hands.

This could include:

• Ensuring customer data is stored and transferred responsibly and securely.
• Checking data retention policies will comply with redress scheme requirements, and monitoring adherence to it.
• Plan a cyber security incident procedure, and disaster recovery plan.
• Where third parties are used, thorough vetting must be done to ensure they will take the same level of care.

As a result, if you’re one of the following, get ready, you could soon be flavour of the month.

• IT Consultant
• IT Specialist
• Software Developer
• Software Engineer
• Back-End Developer
• Full Stack Developer
• Solutions Architect
• DevOps Engineer
• Infrastructure Automation Engineer
• Process Automation Engineer
• Intelligent Automation Specialist
• Cybersecurity Specialist
• Cyber Risk Analyst
• CRM Specialist
• CRM Developer
• QA Engineer
• Quality Analyst
• Quality Assurance Tester
• Test Analyst
• Product Owner
• Project Manager
• Digital Transformation Consultant
• Cloud Engineer
• IT Infrastructure Consultant
• IT Helpdesk Technician

Marketing & Public Relations

Last but by no means least, there may be a desire for marketing and PR specialists. After all, not only is the scandal a fiscal blow to the organisations involved, but a major stain on their reputation. To help clean this up, firms may seek assistance with conducting client and media comms in line with FCA expectations, re-establishing trust through PR work, and implementation of informational and promotional campaigns.

Therefore, these types of contractors could be on their radar:

• Marketing Consultant
• PR Specialist
• PR Consultant
• Communications Consultant
• Copywriter
• Brand & Messaging Specialist
• Crisis Communications Consultant

How Could Recruiters Benefit?

The motor finance claims scandal could be good news for recruiters, too. The sudden surge in staffing requirements mean firms are going to need help. The process of advertising roles, vetting, interviewing and hiring contractors would take time and money, in a situation where both could be in scant supply.

Therefore, recruitment agents will be well-placed to step in, supplying pre-vetted, skilled workers for fixed terms. Indeed, firms such as Deloitte and TCC have already began advertising how they can assist, and looking at their job boards shows that roles for this case are beginning to be added.

So, if you’re a recruitment agency that works with any of the roles above, it could be worth promoting your services to motor finance lenders once the Supreme Court ruling lands.

Trafalgar Umbrella Can Help Contractors & Recruiters with the Motor Finance Redress Scheme

A lot of the contractor roles coming up are likely to be Inside IR35, and therefore subject to taxes such as national insurance. For contractors, this means roles advertised by agencies will probably be either via an Umbrella or Agency PAYE, at the agency’s discretion.

If the role is via umbrella, get in touch with Trafalgar. We’ve been working with contractors in the finance and professional industries for over a quarter of a century, so we know exactly how you work and get paid. What’s more, we offer our contractors a comprehensive suite of exclusive benefits, whether you choose our standard or Gold plan. We’re a trusted and accredited provider, as our ‘Excellent’ rating on Trustpilot can attest. So, if you’re interested in our services as a contractor for the motor finance redress scheme, why not get in touch, or Calculate Your Take Home Pay?

Or, if you’re a recruiter, find out how partnering with Trafalgar Umbrella can safeguard your reputation, reduce risk, and enhance your value to clients.

The last thing you need when supplying contractors to clean up the motor finance industry’s mess is to end up in a scandal of your own. That’s where Trafalgar Umbrella comes in. We take the burdens of PAYE, IR35, HMRC and Employment Compliance off your shoulders by providing a fully compliant and hassle-free umbrella payroll service. Our FCSA, Investors in People Gold, Cyber Essentials and ISO 9001 Accreditations are all testament to our long-standing reputation for industry excellence.

We love the jobs you hate, such as ID & Right to Work Checks, Statutory Payment administration, and Pension Enrolment/Payments. We also offer Flexible Payment Terms, to help both your contractors and your cashflow.

So, if you want to supply contractors with confidence, Get in Touch with Trafalgar Umbrella Today.

Conclusion

It remains to be seen exactly what impact the motor finance scandal will have. Exactly what lenders will have to do is in the hands of the impending Supreme Court ruling, and the FCA.

Regardless, we expect to see a flurry of activity amongst the regulator and lenders, as they work to address the outcomes of the current scandal and ensure ultimate compliance going forward.

While finance lenders are likely waiting anxiously, it could be a great time to be a contractor or recruiter.

If you have any questions about the content of this article, please do get in touch. We’d be happy to discuss how we could work together.