The Financial Conduct Authority (FCA) has confirmed its compensation scheme for car buyers who...
The Financial Conduct Authority (FCA) has confirmed its compensation scheme for car buyers who were not given important information when taking out motor finance. The scheme covers motor finance loans taken out between 6 April 2007 and 1 November 2024. Millions of customers are set to receive payouts, with the average payout being £830.
As a result of the failure to disclose important information about their loan agreements, customers were denied the chance to seek better deals and, in some instances, paid more for their loans. Customers may be due compensation if they were not told clearly that either:
- their dealer or broker set the interest rate to earn more commission (using a discretionary commission arrangement);
- the commission was high – at least 39 per cent of the total cost of credit and 10 per cent of the loan; or
- the dealer or broker was using one lender or gave one lender the right of first refusal – except where lenders can show that there were visible links with a manufacturer and franchised dealer, such as where they had a similar name.
The FCA advises customers who are concerned that they may have been treated unfairly to make a complaint. Lenders will only contact customers who have not complained if they are likely to be owed money. This should occur by 31 December 2026 for agreements started from 1 April 2014, and by 28 February 2027 for agreements started between 6 April 2007 and 31 March 2014.
Customers who are not contacted will have until 31 August 2027 to make a claim. Customers can choose to go to court instead of participating in the FCA's compensation scheme.
