People are expected to get £830 on average but compensation amounts can vary
Nikhil Rathi, CEO of the Financial Conduct Authority, speaking to MPs(Image: UK Parliament)
The boss of the Financial Conduct Authority (FCA) has spoken to MPs about the progress of the car finance mis-selling dispute. He told MPs that his group is talking with lenders about how to get “full and final settlement” for those affected.
Nikhil Rathi, CEO of the FCA, gave an update to the Treasury Committee about the on-going debacle. The regulator previously said that those affected by the historical issue are expected to get £830 per finance deal on average, after they ordered that there should be a redress scheme. Nikhil Rathi, CEO of the FCA, told the MPs that he is keen to move the issue forward as millions of people “need this money now”.
The controversy relates to some 12 million car finance agreements sold between April 2007 and November 2024, where customers were not properly informed of the terms of their deal. This includes some PCP (personal contract purchase) arrangements or Hire Purchase deals during this period. The FCA previously mandated that there will be two redress schemes, with drivers thought to be owed £829 on average per agreement.
Payouts were meant to start in July 2026 but the scheme is on hold as there have been three legal challenges to the FCA’s proposed scheme. This means compensation will not be paid until at least 2027.
‘Full and final settlement’
But Mr Rathi said his team is still working on the issue. He told the committee: “We are talking to lenders, we are talking to some claims law firms as well, about where consumers want to move forward with the terms of the scheme and get compensation at the level of the scheme, that they can do so in full and final settlement. There are millions of people in a difficult cost-of-living situation who need this money now.”
Under the scheme, the finance firms will have to review their records and contact previous customers who may have been affected. But if you have details of a finance deal you were sold during this period, you can make a complaint to the company for your case to be looked into.
Mr Rathi said that some people who have complained should get a response soon, if they are deemed to not be in scope for the payout scheme. He said: “The claims that are not eligible for redress and are not at issue in the litigation will move forward. And so consumers who are not entitled to redress will get an answer, so we’ll see how many of those seek to challenge that answer in the Financial Ombudsman Service.”
‘Ready for all scenarios’
The regulator boss said his group will be putting pressure on lenders to put right these historical wrongs and make sure everyone gets the compensation they deserve. He said: “We’ll learn a lot in the next few months, and we will make sure, for all scenarios, everybody is ready: the Financial Ombudsman Service, but also the lenders.
“And we are holding the lenders’ feet to the fire to make sure that they have provisions, that they have capital in the United Kingdom to make sure they are ready to deal with all scenarios. They’ve had many years now to prepare, and we need to respect the litigation and the process and then move forward with whatever answer it gives us.”
Who could be owed compensation under the car finance mis-selling compensation scheme?
You could be in scope for compensation if you took out car finance for a motor vehicle, such as a car, motorbike, van or campervan between April 6, 2007 and November 1, 2024, and you were not told about certain arrangements for the deal.
These arrangements include:
- A discretionary commission arrangement (DCA) – Where the broker could adjust the interest rate you paid to get a higher commission
- A high commission arrangement – This means the commission charged made up at least 39 per cent of the total cost of credit (the interest and charges for your loan) and 10 per cent of the loan
- Contractual ties – Where the broker only used one lender or gave to one lender the right of first refusal on your loan.