Millions of UK drivers who mis-sold car finance to get average compensation of $829

Millions of drivers who mis-sold motor finance agreements will get compensation of £829 this year under plans by the regulator. The Financial Conduct Authority has made a proposal to a redress scheme that would cost lenders a total amount of £9.1 billion, and this will see fewer loan agreements eligible for compensation. 

A few 12.1 million motor finance deals will meet the new criteria, down from the initial estimate of 14.2 million. Using finance agreements, a majority of new cars and many second-hand ones are bought. The regulator said firms are expected to pay nearly 7.5 Euro billion euros to those who took out eligible motor finance deals, while the administrative cost of this scheme will reach around £1.6 billion. The proposal will likely be challenged by lawyers and landowners. 

The FCA stated: “We expect everyone to get behind the scheme, and lenders to put things right promptly for their customers.”

The Finance and Leasing Association (FLA), which represents the industry, said that the scheme was too broad.

FLA chief executive Shanika Amarasekara said: “We have always been clear that where consumers suffered loss, redress must be paid.”

“But any redress scheme for a market of this size must accurately identify and compensate only those customers who genuinely suffered loss.”

Co-founder Alex Neill said: “Millions of people were overcharged, and our research shows some were pushed into real financial difficulty.”

“This was the regulator’s chance to put that right, but it instead appears to have let lenders off the hook.”

Firms will get time up to June this year for car finance loans taken between April 2014 and November 2024. They will have time up to the end of this year for deals set between April 2007 and March 2014.

People who submit a complaint or have already complained before the end of the period must be contacted by their leader within 3 months of those dates. FCA also said that those unhappy with the amount offered may complain using the free Financial Ombudsman Service, which will check that lenders are sticking to the rules.