The car finance compensation scheme is expected to see payouts due on around 12.1 million agreements, with drivers set to get £829 back per deal on average
The car finance compensation scheme was confirmed in March(Image: Getty Images)
A major car finance provider is reportedly on the brink of collapse weeks after the industry-wide mis-selling compensation scheme was confirmed.
Sky News reports that Blue Motor Finance is lining up administrators as it faces a redress bill of over £50million.
The company is said to have lined up accountancy firm EY to work out possible rescue plans. If the company cannot be saved, the news website reports that it would likely fall into insolvency.
The Mirror has contacted Blue Motor Finance for comment. The car finance compensation scheme is expected to see payouts due on around 12.1 million agreements, at a cost of £9.1billion for the industry.
Drivers who are owed money will get an average of £829 compensation for each finance agreement.
The compensation scheme covers car finance agreements taken out between April 6, 2007 and November 1, 2024, where commission was paid by the lender to the broker.
You may have been mis-sold if your agreement had a discretionary commission arrangement, a high rate or commission, or a contractual tie that you were not properly told about.
The Financial Conduct Authority (FCA) has urged people who may be affected to put in a complaint to the lender that provided the car finance.
Martin Lewis has warned people not to use a claims management company or law firm, as these will take 30% of any compensation owed to you.
However, three lenders and a consumer group have launched legal challenges to the redress scheme.
The financial services arms of carmakers Volkswagen and Mercedes-Benz and the car finance arm of French bank Credit Agricole are appealing the plans, and Consumer Voice, a group representing consumers, is also challenging the compensation package.
The FCA had previously warned that the legal challenges could cause delays to compensation but said it would defend its scheme.
The regulator said in a statement: “We will defend the scheme robustly as lawful and the best way to resolve such a widespread, long running and complex issue.
“These legal challenges create fresh uncertainty for millions of consumers and for the second largest consumer credit market, with £39 billion borrowed in 2024.
“We are therefore engaging at pace with lenders and consumer groups to understand the breadth of views as we determine next steps for the scheme, including contingency planning.”
Industry body Finance and Leasing Association and major lenders including Lloyds, Barclays, Santander and Close Brothers have decided not to challenge the scheme.