Financial remuneration for car loans: The Financial Conduct Authority (FCA) issues a word of caution to car owners, advising against engaging with deceitful claim firms aiming to grab a portion of the £18 billion at stake in vehicle finance compensation.
The Financial Conduct Authority (FCA) has announced plans for a compensation scheme for motor finance customers, following a landmark ruling by the Supreme Court in August. The scheme, which is expected to cost up to £18bn in total, will cover around 30 million agreements from 2007 to near-2020.
The FCA's decision to consult on an industry-wide redress program comes after the discovery that many motor finance firms were not complying with rules or the law by not providing customers with relevant information about commission paid by lenders to car dealers who sold the loans.
In a joint statement with the Solicitors Regulation Authority, the FCA has also warned against poor practices in motor finance commission claims by claims management companies (CMCs) and law firms. The authority has required CMCs to remove or amend 396 motor finance commission promotions between January 2024 and August 2025.
According to the FCA, more than three quarters (79%) of motor finance customers are aware they may be owed compensation, and six in 10 (61%) know about a possible compensation scheme. Among those who have already made a claim, just under half (46%) did so using a CMC or law firm. However, the FCA has warned consumers about scammers pretending to be car finance lenders and falsely claiming that people are owed compensation, despite there being no car finance compensation scheme in place yet.
The FCA's executive director, Sheree Howard, said the FCA will set out plans for a free, easy-to-access motor finance compensation scheme. The consultation on the industry-wide redress program will end in early October, and compensation, where it is due, can start to be paid next year.
The FCA will propose rules on how those lenders who provided motor finance should decide whether someone is owed compensation and how much. The authority will also monitor if firms are following the rules. If the scheme is implemented, redress will be paid to motor finance customers in 2026.
It is estimated that most individuals will probably receive around £950 in compensation per agreement. However, consumers who use a CMC or law firm to make a motor finance claim could pay around 30% of any compensation as fees. The FCA has emphasised that if a redress scheme is introduced, customers will not need to use a CMC or law firm to make a claim.
As many as four in 10 (41%) of those aware they may be owed money didn't know they would not need to use a CMC or law firm if a redress scheme is introduced. The FCA's consultation on the industry-wide redress program will provide further details on how customers can make a claim and what they can expect from the scheme. The motor finance-related compensation scheme is planned to be published in the period from mid-2024 to early 2025.
Read also:
- Trade Disputes Escalate: Trump Imposes Tariffs, India Retaliates; threatened boycott ranges from McDonald's, Coca-Cola to iPhones
- Aquatech purchases Koch's Direct Lithium Extraction business, merging Li-ProTM DLE technology into the PEARLTM Technology Platform.
- Nepal's Journey: Evolution from Street Life to Political Power
- Li Auto faces scrutiny after crash test involving i8 model and a truck manufacturer sparks controversy
%20issues%20a%20word%20of%20caution%20to%20car%20owners%2C%20advising%20against%20engaging%20with%20deceitful%20claim%20firms%20aiming%20to%20grab%20a%20portion%20of%20the%20%C2%A318%20billion%20at%20stake%20in%20vehicle%20finance%20compensation.){kind=link}