Millions of drivers could be owed hundreds of pounds in compensation
Motorists owed compensation for being mis-sold car finance have been warned against unnecessarily paying out to secure their refund. Around 14 million people are believed to be owed hundreds of pounds due to the historical scandal. Lenders will be required to contact those affected by the issue to invite them to sign up for a compensation scheme, the Financial Conduct Authority has announced.
The average payout per finance agreement is estimated at £700. Some drivers could have multiple agreements where compensation is due.
The scandal concerns people who were mis-sold car finance, where lenders inflated interest rates charged on loans to provide dealers with higher commission. Many customers were not adequately informed about how these interest rates were arranged.
Drivers eager to bag their rightful amount have been cautioned against using third-party claims companies. Tom Jervis, consumer editor at Auto Express,, said: “Those who’ve had multiple affected deals could receive several thousand pounds in total and my advice is simple: don’t use third-party claims firms.
“They’re completely unnecessary here and can take up to 30 percent of your compensation in fees. The FCA’s process is free, fair and designed to be easy to use, so there’s no reason to hand over a large cut of your money to a middleman.”
If you had three compensation claims this would mean you would be owed £2,100 on average. If you opt for a third-party company with a 30 percent fee, you could lose £630 of your claim needlessly.
Lenders are required to contact those affected within six days of when the FCA compensation launches, inviting them to participate. Should you have lodged a complaint with your lender in the past, it will be automatically assumed that you wish to opt in if you do not respond within a month of the scheme’s launch.
The FCA has not confirmed any dates for when the compensation scheme will start but it has said payouts could be made from next year. If you are not contacted due to the lender not retaining your details, you will have one year from when the scheme launches to submit your claim.
You also have the choice to not take part in the scheme and pursue legal action, potentially resulting in higher compensation. However, there is no guarantee of a larger payout if you go to court over the issue.
Mr Jervis was pleased to see more information come out from the FCA regarding the compensation scheme. He said: “This car finance compensation scheme has been quite confusing from the start, with very little clarity about what’s been happening, so it’s a relief that we’re finally getting some clear answers.
“The FCA’s official redress scheme will provide a proper route for millions of motorists to get fair compensation after years of uncertainty.”
Who might be eligible for car finance mis-selling compensation?
According to FCA guidelines, you could make a claim if you were sold one of these three types of car finance between April 6, 2007 and November 1, 2024:
- A discretionary commissions arrangement
- A finance deal with an excessively high commission (such as 35 per cent of the total cost of credit and 10 per cent of the loan)
- An agreement granting the broker exclusive rights to the lender.
