FCA considering compensation scheme over car finance scandal - raising

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Thousands of motorists who bought cars on finance before 2021 could be set for payouts as the Financial Conduct Authority (FCA) has said it will consult on a compensation scheme.

In a statement released on Sunday, the FCA said its review of the past use of motor finance “has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers”.

“Where consumers have lost out, they should be appropriately compensated in an orderly, consistent and efficient way,” the statement continued.

Read more: How to tell if you’ve been mis-sold car finance

The FCA said it estimates the cost of any scheme, including compensation and administrative costs, to be no lower than £9bn – adding that a total cost of £13.5bn is “more plausible”.

It is unclear how many people could be eligible for a payout. The authority estimates most individuals will probably receive less than £950 in compensation.

The consultation will be published by early October and any scheme will be finalised in time for people to start receiving compensation next year.

What motorists should do next

The FCA says you may be affected if you bought a car under a finance scheme, including hire purchase agreements, before 28 January 2021.

Anyone who has already complained does not need to do anything.

The authority added: “Consumers concerned that they were not told about commission, and who think they may have paid too much for the finance, should complain now.”

Its website advises drivers to complain to their finance provider first.

If you’re unhappy with the response, you can then contact the Financial Ombudsman.

The FCA has said any compensation scheme will be easy to participate in, without drivers needing to use a claims management company or law firm.

It has warned motorists that doing so could end up costing you 30% of any compensation in fees.

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