The Financial Conduct Authority has said motor finance claimants should start to receive compensation this year – despite extra delay being baked into the process. The regulator said that, given the scale and complexity of the compensation scheme being proposed, there will need to be an implementation period of three months between details being agreed and the system functioning. That period will be up to five months for older car finance agreements.
The FCA has received more than 1,000 responses to its proposals to compensate motor finance customers who were treated unfairly. The scheme is designed to avoid the need to go through a law firm.
Decisions on the scheme have yet to be made, but initial details were released today on how it will operate. Final rules are likely to be published later this month.
The FCA said that, even with extra processes being involved in the scheme, millions of people will receive compensation this year. It added: ‘Our advice remains that anyone concerned they weren’t told about commission involved in their motor finance deal should complain now. Doing so means they should get any compensation sooner. There is no need to use a claims management company (CMC) or law firm, and those who do may lose over 30% of any compensation.’
The regulator said it has continued to crack down on poor practice by CMCs, with more than 800 misleading advertisements removed or amended since January 2024. Four companies have agreed to stop taking on new clients until they can show they comply with the FCA’s rules.
The Supreme Court’s decision last summer partially opened the way to making compensation claims, and law firms offering advice in this area have continued to market their services despite the FCA’s warning about likely costs.
Consumer rights organisation Consumer Voice has said it supports a fair and timely redress scheme which avoids pushing people into court action. But it said this will be achieved only if the FCA creates an opt-out scheme – ensuring that all affected consumers have access to redress – and increases the compensation proposed to reflect the true level of harm.
Alex Neill, co-founder of Consumer Voice said: ‘It’s a victory for common sense that drivers who have already complained about motor finance will be automatically included in the scheme and receive a prompt offer of compensation. Allowing lenders more time to process older complaints will only be justified if they play fair and use the extra time to do everything possible to locate the paperwork and contact customers.’