The car finance mis-selling scandal will be remembered as one of the greatest windfall mass payouts, taking its place beside the infamous PPI (payment protection insurance) scheme. Between 2007 and 2024, the FCA estimates 12.1 million car finance agreements in the UK were mis-sold. On 30th March 2026, the FCA published its final redress scheme, which will be free for consumers to claim. 

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While each case will be judged on its own merit, the average payout is expected to be around £830. The FCA predict it will blow a £7.5 billion hole in the industry. But the financial impact is only the beginning. In this article, we’re analysing how technology like Flexys’ can help lenders overcome the ripple effect of new risks.

Restore trust and stay competitive with better customer service

Once you realise you’ve been overpaying, it’s extremely difficult to trust that service again. As a direct result of the scandal, the public is now significantly more suspicious of the whole car financing chain from the bank to the lender, to the dealership itself.

More than one in two (55%) have lost confidence in car dealerships. Nearly one in two (49%) now have less faith in financial services. And almost one in two (45%) trust banks less since finding out about the mis-selling scandal, according to research by PA Consulting. Separately, a YouGov survey found slightly less damaging news, finding just one in four (23%) have lost confidence in banks since the scandal. Whether 23% or 55%, it’s still a big dent in confidence, making the whole industry vulnerable to competition from new market entrants. It’s a very real risk. After hearing about the scandal, three in four customers will now shop around for financing instead of going for the default lender, making traditional partnerships potentially less profitable too. 

Enticing back customers will take work. Lenders will need to offer compelling rates, suited to borrowers’ unique needs. Integrating open banking technology does this automatically, without agent intervention. Lenders get up-to-the-minute data on customers’ risk profiles, while preserving capital from agent costs. With this cost-effective strategy, they can offer the best market rates, and dynamic payment plans when required. Features like these not only save customers interest but also help to quietly preserve dignity during times of financial distress, restoring trust. They also prevent defaults and boost collection rates too.

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Rebuild damaged reputations with smooth, error-free processes  

The scandal has dominated headlines for weeks, and there’s no denying that the industry’s reputation has been hit both domestically and internationally. Share prices of some of the biggest lenders involved have plummeted and become volatile. The last thing lenders need is another wave of headlines about poor data handling or audit trails. 

During times of stress or increased workloads, processes which are manual or tied to legacy systems can become plagued with duplicated work, inconsistent reporting or human errors. What’s more, increased regulatory requirements and scattered ways of working have chipped away at customer services resources over the years. But in the coming weeks and months, all agents will be needed to answer calls and questions in the most human and empathetic way possible. 

Our solution is to automate tasks such as reporting or data processing. It makes no sense for agents to be updating Excel spreadsheets while the phones are ringing with anxious customers. Giving agents time back to focus on rebuilding customer relationships is a vital part of fixing the reputational damage, while smooth and seamless report generation can help regulators and customers’ lawyers glide through their workloads too.

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Overcome complexities with real-time automatic updates

In the short-term there are likely to be many moving parts for lenders to juggle. Customers could find that their rate changed, for personal or external reasons. At the same time, they could fall into arrears but also be owed compensation. Each case is different, and with upwards of 12 million cases it can easily become complicated for lenders. Those who do not manage it well risk a vicious cycle of more lost confidence, damaged reputation and regulatory penalties. 

This is truly where real-time software like Flexys shines. Every rate change, compensation payment, repayment, risk adjustment and arrear is automatically updated. Borrowers have a clear view of how much they owe, and lenders have a single source of truth.

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Improve audit trails and reduce regulatory risks with automatic updates and report generation

It’s likely that regulators are going to be paying closer attention to lending practices following the scandal. As the Supreme Court found the mis-selling illegal in October 2025, this gives the FCA a significant legal foothold to take further action. 

Water-tight audit trails, instant report generation and built-in compliance can all help to stay on the right side of regulators. More importantly, they can help managers and compliance officers keep track of the communications between employees, borrowers and third parties. Conversations, direct messages and emails are all stored alongside the open banking and contact details. If there is a potential breach, software like Flexys can send a signal to compliance teams or managers for further investigation. 

These features are also extremely helpful for current regulatory compliance, as well as potential issues in the future. With open banking integrations, lenders have data to clearly see if their borrower could be in a moment of financial vulnerability, for example, if they do not receive their payslip one month. From here, the platform can automatically suggest tailor-made repayment plans without any need for agent intervention. 

This can also help to keep track of consumers. The mis-selling scandal spans almost two decades, and in this time, an estimated 13% of borrowers have changed their surname, while 57% have changed address. Open banking integrations help to keep track of the chain over time, providing more complete audit trails.

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"Restoring faith in UK motor finance requires more than just apologies; it requires better systems. By automating the heavy lifting of compliance and data management, we enable lenders to be more agile, more empathetic, and ultimately, more competitive. This is the moment to close the gaps and build a stronger, more resilient credit industry."

James Hill, CEO, Flexys

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Re-build capital by allocating resources efficiently

There’s little doubt that the repayments are going to cost lenders money. Lloyds has now set aside £2 billion for the car finance compensation claims.  Close Brothers have allocated £300 million. And for Santander, which has already set aside £2 billion, the potential compensation costs are much higher, previously some of have speculated they could reach between £8.2 and 9.7 billion. The rumours that the bank may exit the UK have created a tense environment. In an unusual move, even Chancellor of the Exchequer, Rachel Reeves is intervening in the case and asking for compensation caps, to help keep business investment in the UK. 

For lenders, it’s a grim reminder to have a rainy-day fund and avoid unnecessary expenditure. Software like Flexys runs on automated, data-driven processes, dramatically reducing the administrative burden, and freeing up agent time to focus on value-adding work. 

What’s more the customer segmentation, personalised payment plans and variable recurring payment options increase the likelihood of payment as well as regulatory compliance. This helps lenders both save and collect revenue across the whole process. 

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A long road ahead… 

While the mis-selling scandal may have knocked consumer confidence, it hasn’t shattered it. Despite feeling somewhat betrayed, more than one in four (26%) people now have more trust in the system since the law change and would buy their car with a PCP or hire purchase agreement. For lenders, it’s an opportunity to rebuild stronger and better than before. 

While it may be a long road ahead until consumer and investor faith comes back fully, the process can be good for the industry. This is the moment to reflect on gaps and find ways to solve them. 

At Flexys, we passionately believe in building solutions that work for everyone. Lenders, customers and regulators all deserve smooth, accurate and error-free processes. And borrowers especially deserve to speak to someone who can give their full attention when they pick up the phone.