Millions of motorists are set to receive information about a much-anticipated car finance compensation program on Monday. The scheme aims to address mis-sold car finance agreements taken out between April 6, 2007, and November 1, 2024. If your agreement involved a discretionary commission arrangement, a high rate or commission, or undisclosed contractual ties, you may have been mis-sold.
The Financial Conduct Authority (FCA) estimates that approximately 14 million agreements may qualify for compensation due to unfair practices. The average reimbursement per agreement is expected to be around £700, though individual amounts may vary based on circumstances. The total industry cost, covering payouts and operational expenses, is projected to reach £11 billion.
Despite opposition from lenders and car finance providers, the FCA is moving forward with the scheme’s finalization, with details to be revealed after markets close on Monday. The regulator had previously outlined draft plans and received over 1,000 responses during a consultation period, allowing for potential adjustments.
Affected individuals are advised by the FCA to lodge complaints with the relevant lenders. Notably, consumer rights advocates like Martin Lewis recommend against using claims management firms or law practices, as these entities typically claim a significant portion of any owed compensation.
Craig Tebbutt, a financial health expert at Equifax UK, noted that while average compensation levels are estimated at £700 per agreement, final specifics regarding scale, scope, and timelines are expected to be disclosed soon. Consumers are encouraged to review their documentation promptly in preparation.
The FCA plans to grant lenders a three-month grace period for redress payments, extending to five months for older motor finance agreements. Those who have filed complaints can expect notification within three months post-implementation period conclusion, detailing compensation eligibility and amount. Acceptance of the proposed figure would trigger the disbursement process, slated for completion by the end of 2026.
In a recent update, the FCA announced that it will no longer require drivers to opt out of the scheme and will not mandate lenders to correspond via recorded delivery. Stay tuned for further updates on this developing story.