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The UK’s financial regulator has informed MPs that millions of motorists are entitled to compensation next year for the mis-selling of car loans. This compensation is related to commission arrangements between lenders and dealers, as well as inaccurate information provided to car buyers, following a ruling by the UK’s highest court. The Supreme Court’s decision has narrowed down the scope of these cases, but up to 30 million agreements made between 2007 and 2020 may be reviewed for eligibility for compensation.
The Financial Conduct Authority (FCA) has stated that a finance redress scheme has yet to commence, but plans are in place for an awareness campaign to clarify the process of payouts, eligibility criteria, and how individuals can make a claim. During a session with MPs on the Treasury Committee, Nikhil Rathi, the FCA’s chief executive, mentioned that details of the scheme are still being finalized, including whether claimants will need to opt-in or will be automatically included.
According to the FCA, claimants are expected to receive less than £950 per deal. Eligible individuals are likely to include those with agreements under discretionary commission arrangements, buyers who had unfair contracts due to high dealer commissions, and customers who were not provided with accurate information about securing the best finance deal. Despite the progress made, some motor finance firms are not cooperating with the regulator in implementing the compensation scheme.
In contrast to the PPI compensation scheme, the motor finance mis-selling redress is anticipated to cover fewer individuals, but it will still affect millions of drivers. The FCA has intervened in numerous promotions by claims management companies (CMCs) that exaggerated potential payouts for drivers. The regulator has also faced questions from committee members regarding consultations with law firms involved in the case, with lawyers suggesting average payouts of £1,800 from the court. Nikhil affirmed that consultations have been extensive and will continue in the future
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