(qlmbusinessnews.com . Tue 12th Aug, 2025) London, UK —
Spotting Fraud: How to Avoid Fake Car Finance Compensation Offers
Motorists in the UK have been issued a stark warning to remain vigilant for fraudsters masquerading as car finance lenders, peddling non-existent compensation offers. The alert comes from the Financial Conduct Authority (FCA), following its disclosure of plans to establish a compensation scheme for those who have been mis-sold unlawful car finance deals.
This development follows a ruling by the Supreme Court earlier in the month, which determined that the commission paid by lenders to car dealers for arranging loans was, in many instances, legal. However, the ruling also highlighted that certain motorists, particularly those burdened with excessively high commission charges, might still be eligible to claim compensation.
Historically, some car dealers reaped higher commissions from lenders for securing motorists into pricier interest loans, a practice that has been prohibited since 2021.
In response to the Supreme Court's decision, the FCA has embarked on a six-week consultation to deliberate on the introduction of a compensation scheme for qualifying motorists, with the anticipation that most beneficiaries will receive less than £950. Should the scheme gain approval, the FCA aims to commence payment distributions by next year.
However, since the announcement of the compensation scheme, the FCA has been made aware of con artists contacting individuals, feigning affiliation with car finance lenders, and offering non-existent compensation in a bid to extract personal details.
Nisha Arora, the Director of Special Projects at the FCA, cautioned, “We've been alerted to scammers telephoning individuals, impersonating car finance lenders, and proposing phony compensation while soliciting personal details. As of now, there is no such compensation scheme in place. We urge anyone receiving such calls to disconnect immediately and refrain from sharing any personal information.”
The FCA emphasised that it would never request bank account PINs or passwords from the public and has encouraged individuals to report any suspicious calls or messages to Ofcom.
Following early reports from consumers about these targeted scams, a spokesperson from the watchdog expressed that the warning was issued promptly to pre-empt further incidents and swiftly inform the public.
Moreover, the FCA, together with the Solicitors Regulation Authority, has previously advised motorists against enlisting claims management companies (CMCs) or law firms prior to any definitive arrangements on a centralised claims scheme. Engaging such services could see individuals forfeiting up to 30% of any compensation in fees.
The envisioned centralised redress scheme aims to streamline the compensation process, eliminating the need for external assistance from CMCs or law firms, thereby ensuring consumers can claim what is rightfully theirs with ease.
The estimated cost for this redress scheme could ascend to as much as £18bn, with the FCA projecting that millions may be entitled to submit claims. This includes individuals who have purchased new or used vehicles dating as far back as 2007. The FCA has stated that the financial burden of the redress scheme would be borne by lenders, encompassing major banks and specialised motor finance companies.
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