Motor finance victims urged to complain as compensation could hit £18bn

Yahoo

a day ago

Millions of drivers could be owed a share of up to £18bn after the Financial Conduct Authority (FCA) announced it will consult on an industry-wide compensation scheme.
Motorists could receive a pay-out after it emerged many motor finance firms were not complying with rules or the law by not providing customers with relevant information about commission paid by lenders to the car dealers who sold the loans, the FCA said.
The authority estimates that most individuals will probably receive less than £950 in compensation.
The final total cost of any compensation scheme is estimated to be between £9 billion and £18 billion, the FCA added.
Consumer champion Martin Lewis said in a video posted to X that millions of people are likely to be due a share of up to £18 billion.
He told Sky News the consultation is 'likely to mean 40% of people who got a car finance deal between 2007 and 2021 will be due some form of redress, likely to be hundreds not thousands of pounds'.
The consultation will be launched by early October. If the compensation scheme goes ahead, the first payments should be made in 2026.
It comes after Friday's ruling by the Supreme Court on cases in which the FCA had intervened.
While some motor finance customers will not get compensation because in many cases commission payments were legal, the court ruled that in certain circumstances the failure to properly disclose commission arrangements could be unfair and therefore unlawful, the FCA added.
People who have already complained do not need to do anything, the FCA said.
Consumers who are concerned that they were not told about commission and think they may have paid too much to their motor finance lender have been urged to complain now.
Consumers do not need to use a claims management company or law firm and doing so could cost them around 30% of any compensation paid, it added.
To make an initial complaint, the FCA says people should get in touch with their lender or broker, then the provider should send an acknowledgement within eight weeks.
Under the FCA's current rules, it will not have to send a final response until after December 4 2025. But as the FCA is consulting on a compensation scheme, the deadline may be extended.
If customers are unhappy with their provider's response, they can then complain to the Financial Ombudsman Service, the FCA added.
The authority will propose rules on how lenders should 'consistently, efficiently and fairly' decide whether someone is owed compensation and how much. It will monitor if firms are following the rules and act if they are not.
Nikhil Rathi, chief executive of the FCA, said: 'It is clear that some firms have broken the law and our rules. It's fair for their customers to be compensated.
'We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.
'Our aim is a compensation scheme that's fair and easy to participate in, so there's no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.
'It will take time to establish a scheme but we hope to start getting people any money they are owed next year.'