Millions of drivers set for payouts after FCA car finance probe
Millions of UK motorists could receive compensation averaging £700 each after the Financial Conduct Authority (FCA) proposed a sweeping £8.2 billion redress scheme for unfair motor finance agreements sold between 2007 and 2024.
The scheme follows a major investigation into discretionary commission arrangements, which allowed car dealers and brokers to set higher interest rates in order to earn larger commissions — often without customers being told.
The FCA estimates up to 14 million agreements could be eligible for payouts, covering loans where lenders failed to properly disclose key information about commission structures.
Nikhil Rathi, chief executive of the FCA, said: “Many motor finance lenders did not comply with the law or the rules. Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.
“We recognise that there will be a wide range of views on the scheme, its scope, timeframe and how compensation is calculated. On such a complex issue, not everyone will get everything they would like. But we want to work together on the best possible scheme and draw a line under this issue quickly. That certainty is vital, so a trusted motor finance market can continue to serve millions of families every year.”
The regulator said the scheme will be free for consumers and designed to be “quick, fair, and easy to use.” It would cover agreements taken out between 6 April 2007 and 1 November 2024, where a lender paid commission to a broker or dealer.
Customers affected would not need to use a claims management company, as lenders will contact them directly once the scheme goes live. The FCA warned that using third-party firms could result in significant deductions from any compensation awarded.
Consumers who have already made complaints about mis-sold car finance could receive their payouts sooner, while those who have not yet complained will have up to six months to opt into the scheme once contacted by their lender.
The FCA said the scheme would help prevent a flood of costly legal cases and ensure fair outcomes for both consumers and firms. Without it, many claims could end up in court or with the Financial Ombudsman Service, leading to long delays and uncertainty.
The proposed framework is open for consultation, with the FCA expected to finalise details later this year. If approved, compensation payments could begin in 2026.
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