ITV News reporter Ellie Pitt explains why victims of the mis-selling of car finance could be owed hundreds of pounds through the redress scheme.
Compensation payouts on around 14 million unfair car finance deals could start next year, the Financial Conduct Authority (FCA) has said.
On Tuesday, the regulator confirmed victims of the mis-selling of car finance could be owed hundreds of pounds through the redress scheme.
The scheme comes after the FCA found motor finance firms broke the law or its rules by not properly informing customers about commission paid by lenders to the car dealers that sold them the loan.
It believes that setting up a free compensation scheme will be easier and quicker for customers to access, and more cost-effective for firms by removing much of the legal and administrative work.
FCA chief executive Nikhil Rathi said: “Our scheme aims to be simple for people to use and lenders to implement.
“We recognise that there will be a wide range of views on the scheme, its scope, timeframe and how compensation is calculated. On such a complex issue, not everyone will get everything they would like.
“But we want to work together on the best possible scheme and draw a line under this issue quickly.”
ITV News explains how to know if you’ve been affected, and how much you could be owed.
Who would be eligible?
The compensation scheme would apply to some 14 million unfair motor finance deals.
The FCA has said car finance companies broke the rules by not disclosing information, which prevented consumers from being able to find better deals elsewhere or negotiate, with some paying more for their loan.
The scheme covers motor finance agreements taken out between April 6 2007 and November 1 2024, where commission was payable by the lender to the broker.
According to the FCA, people would only be able to get compensation if they were not told details of at least one of three arrangements:
1. A discretionary commission arrangement, which allowed the broker to adjust the interest rate the customer would pay to obtain a higher commission.
2. A high commission arrangement (35% of the total cost of credit and 10% of the loan).
3. A contractual arrangement or tie between the lender and broker, which provided exclusive or near exclusive rights to lenders to provide credit.
How much compensation is available?
According to estimates by the FCA, people would be set to receive around £700 per agreement on average, with lenders paying out a possible £8.2 billion into the scheme. This is lower than the £9 billion to £18 billion range it had previously projected.
When could I get the money and how?
Research commissioned by the FCA shows that almost half of those aware of possible compensation, but who had not yet made a claim (46%) cite a lack of clarity on whether a claim would be eligible as a barrier, and nearly a quarter (24%) say uncertainty about the level of compensation makes it less likely they would seek compensation.
If you are worried you were not told key details about your motor finance arrangement, such as commission payments, the FCA advises submitting a complaint to your lender.
A document template for making a complaint can be found on the regulator’s website.
Lenders will contact those who have already complained when the scheme goes live. The FCA has said those who have already complained before this point are likely to receive compensation faster.
If you do not submit a complaint, you will be contacted by their lender within six months of the scheme starting and given the option to opt in to it.
The FCA is seeking comments on extending the complaint handling rules by November 4 2025.
The consultation on the proposed redress scheme closes on November 18 2025.
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