Millions of drivers are set to receive information about a highly anticipated car finance compensation program on Monday. The scheme aims to address mis-sold car finance agreements made between April 6, 2007, and November 1, 2024.
If your car finance agreement involved a discretionary commission arrangement, a high rate or commission, or a contractual tie that was not adequately disclosed, you may have been mis-sold. The Financial Conduct Authority (FCA) has identified approximately 14 million agreements that were deemed unfair and could qualify for compensation.
The expected average reimbursement per agreement is around £700, although individual payouts may vary based on specific circumstances. The industry is projected to incur a total cost of £11 billion, covering both payouts and operational expenses.
Despite challenges from lenders and car finance providers regarding the proposed compensation amount, the FCA is scheduled to unveil the final details of the scheme after the market closes on Monday. The regulator had initially outlined draft plans, which have been subject to revisions following feedback from over 1,000 consultations.
The FCA is encouraging individuals potentially affected by mis-sold car finance agreements to lodge a complaint with the respective lender. Notably, consumer advocates like Martin Lewis advise against using claims management companies or law firms, as they typically charge a significant portion of any owed compensation.
Financial health expert Craig Tebbutt from Equifax UK anticipates that average compensation levels could be around £700 per agreement, with precise details to be confirmed soon. Consumers are advised to review their paperwork and prepare necessary details in advance.
The FCA has outlined a timeline for lenders to disburse redress, with a three-month implementation period for recent agreements and up to five months for older ones. Those who have lodged complaints will receive notification within three months post-implementation, detailing the owed compensation amount.
Accepted figures will be promptly disbursed, with the FCA aiming for completion by the end of 2026. Additionally, the FCA announced intentions to streamline the process by eliminating opt-out requests and the requirement for lenders to send correspondence via recorded delivery.