The scheme is expected to see multiple firms pay out around £7.5billion, with total costs including administration set to come in at £9.1billion
Millions of drivers were mis-sold car finance(Image: Getty Images/PhotoAlto)
Santander has agreed to pay compensation to thousands of drivers for its portion of unfair car finance deals.
Payouts are due on around 12.1 million motor finance deals, at an average of £829 each. The scheme is expected to see multiple firms pay out around £7.5billion, with total costs including administration set to come in at £9.1billion.
The Financial Conduct Authority (FCA) set out the compensation scheme last month and banks and lenders have since been reviewing how this will impact their business.
In an update on Saturday, Santander said it does not intend to challenge the FCA decision. Other major lenders that have also confirmed they will not make a legal challenge include Barclays, Lloyds Banking Group and Close Brothers.
A spokesperson for Santander said: “We have decided not to challenge the schemes and will now focus on their implementation.”
Santander added: “This was a finely balanced judgment reflecting our primary desire to bring greater certainty to our customers, shareholders and the wider motor finance sector, factors which outweighed our disagreement with elements of the proposed schemes.
“We will continue to work constructively with regulators and policymakers to seek to improve the competitiveness of the UK in the interests of all our customers, taxpayers and investors.”
The FCA expects millions of claims will be paid out year and the vast majority settled by the end of 2027. Those who have already complained are likely to be first to get paid.
The compensation scheme covers car finance agreements taken out between April 6, 2007 and November 1, 2024, where commission was paid by the lender to the broker.
You may have been mis-sold if your agreement had a discretionary commission arrangement, a high rate or commission, or a contractual tie that you were not properly told about.
The FCA previously said drivers could get an average of £700 back per agreement, but it may be more or less depending on individual circumstances.
The increase in payments comes from the FCA deciding to tighten eligibility for redress so that loans with low commissions or zero interest rates will not be included.
This means fewer drivers than originally thought will be eligible, but payouts will be higher.
The FCA has urged people who may be affected to put in a complaint to the lender that provided the car finance.
Martin Lewis has warned people not to use a claims management company or law firm, as these will take 30% of any compensation owed to you.