Millions of motorists who were victims of improperly sold car finance loans may be entitled to compensation in the upcoming year. Nikhil Rathi, the CEO of the Financial Conduct Authority (FCA), revealed that around 30 million car finance agreements were made between 2007 and 2020, but not all will qualify for compensation.
The FCA is investigating discretionary commission arrangements (DCAs) where brokers and car dealers raised interest rates on loans to earn more commission without informing customers properly. The FCA is considering a redress scheme for affected drivers.
Rathi informed MPs that the consultation for the scheme will launch early in October, with potential compensation payouts expected to commence next year. The FCA advises affected individuals to contact their car finance lender directly for complaints and cautions against using solicitors or claims management companies.
The FCA estimates the total cost of the compensation scheme to be between £9 billion and £18 billion, involving around 38 motor finance firms in the UK. This initiative follows a Supreme Court ruling in August that lenders were not accountable for undisclosed commission payments on car finance agreements, which differs from the ongoing DCA investigations.