The FCA has been consulting on plans for a proposed compensation scheme that could see payouts for 14 million unfair motor finance deals
Car finance compensation plans could be revealed this month(Image: Getty)
Millions of drivers could get mis-sold car finance compensation this year under plans due to be revealed this month.
Under the proposed scheme, you could be due a payout if you used car finance between April 6, 2007 and November 1, 2024 and it included a discretionary commission arrangement (DCA), a high rate or commission, or a contractual tie that you weren’t properly told about.
The Financial Conduct Authority (FCA) has been consulting on plans for a proposed compensation scheme that could see payouts for 14 million unfair motor finance deals.
If it gets the green light, drivers could get an average of about £700 each. In an update today, the FCA said it is likely to make several changes to the proposed compensation scheme after receiving more than 1,000 responses to its consultation.
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It expects to give lenders a three-month implementation period to pay out redress, with up to five months for older motor finance agreements.
Drivers would be told within three months of the end of the implementation period whether they are owed compensation and how much.
They would then be able to accept immediately without waiting for a final determination. The FCA also plans to no longer ask drivers if they wish to opt out, and will not require lenders to write to customers by recorded delivery.
But it said a final decision has not yet been made on whether the scheme should go ahead. The FCA is urging people who may be affected to put in a complaint now.
Your complaint should be made to the lender that provided the car finance. The FCA said there is no need to use a claims management company (CMC) or law firm, as these will take 30% of any compensation owed to you.
The FCA said: “If we proceed with a scheme, we are likely to make several changes.
“If we do go ahead, we expect to publish final rules in late March. The timing of publication will be outside market hours and we will confirm the date in advance.
“Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026.”
The FCA has been consulting on plans since it outlined a proposed compensation scheme last October. It estimated its redress scheme could cost lenders of about £11billion.
But the regulator’s plans have been met with significant pushback from lenders, with Santander and Lloyds Banking Group already putting by significant amounts to cover the expected cost.
Santander boss Mike Regnier last year called for the Government to step in, warning the compensation scheme plans could impact the car finance market and wider motor sector, leading to job cuts.