(qlmbusinessnews.com . Wed 8th Oct, 2025) London, UK —
Millions May Benefit from Reduced Car Finance Compensation: New FCA Scheme Explained
Millions of consumers mis-sold car finance products could see diminished recompense, following new proposals issued by the regulating authority.
The Financial Conduct Authority (FCA) has signalled that settlements could be forthcoming from an estimated 14 million motor finance contracts, stretched across the period from April 2007 to November 2024.
Earlier forecasts by the FCA hinted that each contract mis-selling could yield less than £950 in redress; however, recent calculations adjust the average expected compensation to approximately £700 per contract, potentially obligating lenders to disburse £8.2 billion in amends.
These compensations address concerns relating to commission structures between lenders and dealerships, unjust contracts, and the provision of misleading information to consumers purchasing vehicles.
Nikhil Rathi, the FCA's Chief Executive, endorsed the move for equitable compensation, stating, “It's time their customers get fair compensation.” He acknowledged the complexity of the issue, conceding that not everyone would be fully satisfied with the planned approach.
The proposed settlement framework pledges free access for consumers, though it would award interest on the redress at rates significantly lower than those seen in the aftermath of the payment protection insurance (PPI) scandal.
The FCA's estimations suggest that nearly 44% of all motor finance contracts initiated since 2007 may qualify for redress, although a Supreme Court decision in August has somewhat narrowed the applicability of these claims.
Consumers desiring to lodge a complaint have been advised to contact their lender or brokerage directly, with the FCA providing additional guidelines on the complaint process.
Under the proposed redress scheme, lenders will reach out to individuals who have already registered complaints; absent a response within a month, the lenders will proceed to assess the case and, if warranted, issue compensation.
Those who have previously complained are expected to receive their compensation more swiftly once the scheme is activated.
Consumers yet to lodge a complaint will be contacted by their lender within six months of the scheme's commencement, inviting them to opt into the review process with a six-month window to decide.
For individuals not contacted due to outdated lender details, a one-year period from the scheme's start date will be available to submit a claim.
The regulator has admitted that consumers might opt to bypass the FCA scheme and directly pursue legal action, which could potentially result in either higher or lower compensation, depending on individual case facts.
Critics, like David Bott of legal firm Bott and Co, question whether the average payout adequately reflects the financial detriment experienced by consumers, while Shanika Amarasekara from the Finance and Leasing Association voices concern over the projected costs of the compensation scheme.
Complaints relating to approximately four million transactions have been lodged, albeit mostly on pause, as stakeholders await the implementation of the scheme, anticipated to commence early next year.
Consumer advocacy and industry figures alike call for a cooperative stance from lenders to facilitate these overdue compensations, with the initiative marking a crucial juncture for the FCA in its efforts to address the ramifications of the car finance mis-selling scandal.
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