Millions of motorists are set to receive information about a highly anticipated car finance compensation program on Monday. The scheme aims to address instances of mis-sold car finance agreements made between April 6, 2007, and November 1, 2024.
Drivers may have been misled if their agreements included discretionary commission arrangements, high rates or undisclosed commissions, or undisclosed contractual ties. The Financial Conduct Authority (FCA) estimates that approximately 14 million agreements were unfair and could qualify for compensation.
Previously, it was stated that individuals could potentially receive an average of £700 per agreement, although the final amount may vary based on individual circumstances. The total cost to the industry, covering both payouts and operational expenses, is projected to reach £11 billion.
Despite challenges from lenders and car finance providers regarding the proposed compensation amounts, the FCA is scheduled to reveal the final details of the scheme after market hours on Monday. The regulator had initially outlined draft plans and received over 1,000 responses during the consultation phase, indicating the possibility of adjustments.
The FCA advises those potentially affected to lodge complaints with the relevant lender. Experts in consumer rights, such as Martin Lewis, recommend avoiding claims management firms or law practices, as they typically retain 30% of any owed compensation.
Craig Tebbutt of Equifax UK suggests that while average compensation levels may be around £700 per agreement, the precise scale, scope, and timelines will be confirmed soon. The FCA anticipates providing a three-month window for lenders to disburse redress, extending to five months for older motor finance agreements.
Individuals who have already filed complaints can expect notification within three months following the conclusion of the implementation period, detailing any compensation due. Acceptance of the proposed amount will prompt the release of owed funds, with the FCA aiming to complete the process by the end of 2026.
Additionally, the FCA plans to simplify the process by eliminating opt-out requests and removing the requirement for lenders to send communications via recorded delivery.