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In a recent warning, the Financial Conduct Authority (FCA) alerted motorists to be wary of scammers pretending to be car finance lenders offering false compensation. This cautionary advice followed the announcement by the FCA of a forthcoming compensation scheme for individuals who had been sold illegal car finance deals. The Supreme Court had recently ruled that while commissions paid by lenders to car dealers for loan arrangements were generally lawful, there was potential for further claims from those who had been subjected to exorbitant commission fees.
Car dealers were found to have received higher commissions from lenders for enrolling motorists in loans with elevated interest rates, a practice prohibited since 2021. Subsequent to the Supreme Court verdict, the FCA disclosed plans to initiate consultations regarding the establishment of a compensation scheme for eligible individuals, with anticipated payouts falling below £950 for most claimants. The consultation process is projected to span about six weeks, with potential payments earmarked for next year if the scheme is endorsed.
Following the FCA’s announcement of the compensation scheme, reports surfaced of scammers contacting individuals and falsely promising compensation in exchange for personal information. Nisha Arora, director of special projects at the FCA, unequivocally dismissed these claims as unfounded, emphasizing the absence of an active compensation scheme. The FCA reiterated its stance of never soliciting bank account details or passwords from individuals, advising recipients of such calls to promptly terminate the conversation without divulging personal information. Additionally, the FCA advised reporting any fraudulent calls or messages to Ofcom to mitigate potential harm.
Preemptively addressing concerns raised by consumers, the FCA previously cautioned against engaging with claims management companies (CMCs) or legal firms prior to a final verdict on a centralized claims scheme. Highlighting the potential for significant fees amounting to almost 30% of any awarded compensation, the FCA underscored the simplicity and convenience of a centralized redress scheme, minimizing the need for external assistance. With an estimated financial impact reaching £18 billion, the redress scheme could potentially benefit millions of individuals who purchased new or used vehicles dating back to 2007, with the associated costs to be borne by lenders, encompassing major banks and specialized motor finance entities
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