FCA says car finance payouts will average £829published at 16:58 BST
Kevin Peachey
Cost of living correspondent
Millions of drivers who were mis-sold car finance agreements should receive compensation this year, under plans by the regulator.
The Financial Conduct Authority’s (FCA’s) final plans should see most of the remainder by the end of 2027. After tightening criteria following consultation, some 12 million agreements will be considered unfair and due compensation. Payouts will average £829, bringing the total cost to lenders to £9.1bn.
The vast majority of new cars, and many second-hand ones, are bought with finance agreements.
Image source, Getty ImagesIn 2021, the FCA banned deals where car dealers received commission from lenders, based on the interest rate charged to the customer. These were known as discretionary commission arrangements (DCAs) and were often not disclosed.
The FCA has said this provided an incentive for a buyer to be charged higher interest rates than necessary, leaving them paying too much.
The regulator’s central compensation scheme allows people to complain and potentially receive compensation for mis-sold deals, without the need for a lawyer or to go through the courts.
Some may still decide to take a legal route.
The FCA scheme could still be challenged by lenders and lawyers.
Major lenders have set aside tens of millions of pounds to cover the cost of compensation.