While the scope of compensation claims to be made on an industry-wide level has been narrowed, there is still many who could receive payouts.
About four in 10 cars sold before 2021 were sold through a now-banned method called discretionary commission arrangements.
The UK’s financial watchdog, the Financial Conduct Authority (FCA), had been investigating complaints from motorists about these arrangements.
Under these deals, car dealers were paid more in commission if they clinched a higher interest rate on the loan. The practice has been banned since 2021.
Following the Supreme Court’s decision, Richard Barnwell a partner at advisory firm BDO, said some of those affected by discretionary commission arrangements could qualify for redress.
“If discretionary commission arrangements are deemed to be an unfair relationship, redress could still be from to £5 – £13 billion or more,” Mr Barnwell said.
Martin Lewis, founder of Money Saving Expert, said he believed compensation payments could total £10bn and that he would be “gobsmacked” if there was not a scheme for DCA payments.
“I would very much expect to see the regulator, the FCA, have a consultation for Discretionary Commission Arrangements, and possibly mentioning in there this new category, the one upheld by the Supreme Court, about excessive commission arrangements,” he added.
The FCA has said it will confirm “whether we will consult on a redress scheme before markets open on Monday 4 August”.
“We want to bring greater certainty for consumers, firms and investors as quickly as possible,” it added.
Alex Neill, co-founder of consumer rights group Consumer Voice said it was a “disappointing” ruling but welcomed the fact the court had “made it clear where consumers deserve redress”.
“The financial regulator must now urgently act to introduce a redress scheme that ensures drivers get back what they’re owed,” he said.
But the director general of the Finance and Leasing Association, Stephen Haddrill, said the judgement was “an excellent outcome” that “restored certainty and clarity” to the car market.
A Treasury spokesperson said the government “respected the judgement” and it would “work with regulators and industry to work out the impact for businesses and customers”.