Millions of motorists are set to receive information about a much-anticipated car finance compensation program on Monday. The scheme aims to reimburse individuals who were sold unfair car finance agreements between April 6, 2007, and November 1, 2024. If your agreement included a discretionary commission arrangement, high commission rates, or undisclosed contractual ties, you may have been a victim of mis-selling.
The Financial Conduct Authority (FCA) estimates that approximately 14 million agreements were unjust and could qualify for compensation. The average payout per agreement is projected to be around £700, although this amount may vary based on individual circumstances. The industry is expected to incur a total cost of £11 billion, covering both payouts and operational expenses.
Despite opposition from lenders and car finance providers who argue that the compensation amount is excessive, the FCA is poised to unveil the final details of the scheme after the market closes on Monday. The regulator had initially outlined draft plans but indicated the possibility of adjustments following over 1,000 responses to its consultation.
The FCA is encouraging affected individuals to lodge complaints with the relevant lender to initiate the compensation process. Experts, including consumer rights advocate Martin Lewis, advise against using claims management companies or law firms, as they typically take a significant portion of any compensation owed.
Craig Tebbutt, a financial health specialist at Equifax UK, noted that while the average compensation could be around £700 per agreement, the exact parameters of the scheme are set to be confirmed soon. Consumers are advised to review their paperwork and prepare their details in advance.
The FCA plans to allow lenders a three-month window for redress payments, extending to up to five months for older motor finance agreements. Individuals who have already lodged complaints can expect to receive notification within three months of the implementation period’s conclusion regarding the owed compensation amount. Payment should be processed promptly thereafter, with the FCA aiming for completion by the end of 2026.
Furthermore, the FCA intends to streamline the process by eliminating the opt-out option and removing the requirement for lenders to send communications via recorded delivery to customers.
