Millions of motorists to find out how they will be compensated after car finance saga
Millions of motorists who were victims of mis-sold car loans are set to discover how they will be compensated, as the financial regulator unveils its final plans. The Financial Conduct Authority (FCA) is expected to publish its long-awaited decisions on an industry-wide compensation scheme on Monday afternoon.
The regulator had issued draft proposals last year, and significant changes are anticipated following more than 1,000 responses to its consultation. The proposed scheme is set to cover car finance agreements made between 6 April 2007 and 1 November 2024.
The FCA previously estimated that approximately 14 million deals, representing 44 per cent of all agreements since 2007, were unfairly sold and thus qualify for redress. While an average compensation of £700 per agreement has been suggested, the actual amount will vary significantly based on individual circumstances.
This was expected to come at a total cost of £11 billion to the industry, including the total payouts and the operational costs of running the scheme.
Craig Tebbutt, a financial health expert for Equifax UK, said: “It has previously been estimated that average compensation levels could be in the region of £700 per agreement but the final details around the scale, scope and timelines are expected to be confirmed on Monday.
“However, there is nothing to stop consumers checking their paperwork now and getting their details ready in the meantime.”
He said research by the credit reporting firm found that “many consumers don’t know how to check their eligibility and expect the process to be a hassle, with old or missing paperwork being a real barrier”.
Equifax has launched a car finance checker within its new app that lets people see a list of their past agreements and copy the details, with motorists encouraged to send a complaint to their lender using a template on the FCA’s website if they think they’re eligible for a payout.
Lenders and car finance providers had been challenging the FCA’s proposals with some raising concerns that the expected amount of compensation is too high and does not accurately reflect what customers lost.
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On the other side, some consumer groups and MPs have argued that many motorists will be short-changed under the current plans.
The FCA has already announced some changes that it is making to the process since the proposals were unveiled last year.
This includes giving lenders more time to contact motor finance customers from when the scheme is officially launched.
But it is also aiming to streamline the process by allowing those due redress to accept it immediately without waiting for a final determination.
It thinks that this means million of people would receive compensation in 2026.
