Around 12 million motorists who were mis-sold car finance are each in line for around £829 – with total payouts set to reach £7.5 billion.
The Financial Conduct Authority (FCA) set up the free-to-enter scheme to assist motorists who were denied the chance to see better finance deals, and potentially paid more for their loan than they needed to.
In total, 12.1 million finance agreements made between 2007 and 2024 will be eligible for compensation. That is fewer than the 14.2 million originally proposed by the FCA, which tightened the criteria in order to be fair to consumers and “proportionate” to firms.
But that means the average payout has increased from an originally expected £775. The FCA estimates around 75% of eligible motorists will make a claim, costing the industry more than £9bn once some £1.5 billion in costs are taken into account.
The exclusions include anyone who was on a 0% finance contract or those where the contract was exclusive between the car dealer and a car manufacturer. The FCA has also cut out those where commission was low: below £120 for cases before 1 April 2014, and £150 after that date.
The FCA has also divided the redress scheme into two allocations. The first version covers loan agreements between 6 April 2007 and 31 March 2014, and the second version from April 2014 to November 2024. This decision was taken because the FCA has been advised it may not have the authority to rule on cases before the body was formed.
When asked by Autocar about the likelihood of a challenge to the earlier redress, Nikhil Rathi, chief executive of the FCA, said: ”We think we have the powers to implement; we have had feedback that we don’t have the powers to go beyond back beyond 1 April 2014 – we disagree with that. We think we’ve got the legal powers.
“But given that people have raised that question we’ve chosen to separate the scheme into two.”
The FCA has given lenders a short implementation period to prepare for the redress scheme and start communicating with those impacted.
For the loans taken out after 1 April 2014, banks will have three months from 30 June 2026 to let those people who have already complained that they will be compensated and how much. And three months from 31 August 2026 for those in the earlier 2007-2014 period.
Final payments will be calculated based on compensation plus interest over time.
Tristan Young
By
