More details have been confirmed.
Millions of drivers across the UK are set to find out how they could claim hundreds of pounds in compensation after being mis-sold car finance, as the Financial Conduct Authority (FCA) confirms the final details of a major redress scheme.
The watchdog has now outlined how the compensation process will work, who is eligible, and when payments are expected to be made, with around 12.1 million agreements set to be covered.
Who could be owed money?
If you had a car finance agreement between 6 April 2007 and 1 November 2024, you could be eligible for compensation.
The FCA says around 12.1 million deals will qualify with the average payout now expected to be £829 per agreement, up from the previously suggested £700.
In total, firms are expected to pay out around £7.5bn in redress, with the overall estimated cost falling from £11bn to £9.1bn.
Customers will only be eligible if they were not properly told about certain commission arrangements between lenders and brokers.
- Discretionary commission arrangements (DCAs), where brokers could increase interest rates to boost their commission
- High commission arrangements, where commission made up a significant portion of the total loan cost
- Contractual ties, such as exclusivity deals between lenders and dealers
However, there are exceptions. Cases may be deemed fair if commissions were below certain thresholds, no interest was charged, or lenders can prove the customer did not suffer any financial loss.
What drivers should do now
The FCA is urging anyone who thinks they may have been affected to submit a complaint directly to their lender.
MoneySavingExpert’s Martin Lewis has warned that many people will have “no idea” whether they were mis-sold finance unless they check.
The regulator says drivers can use a template letter available on its website and has stressed there is no need to use a claims management company or law firm; doing so could see you lose more than 30% of any payout.
Those who have already complained, or who do so by 31 August, are most likely to be among the first to receive compensation.
Lenders will also be expected to contact customers who may be eligible but have not yet complained, giving them the option to have their case assessed.
When will payouts be made?
While compensation could technically begin immediately, FCA chief executive Nikhil Rathi said it is unlikely lenders will start paying out straight away.
Instead, the timeline is expected to unfold as follows:
- By January 2027: First payments made to those who complained early
- By January 2028: Vast majority of claims settled
There are also key deadlines depending on when the finance agreement was taken out:
- 30 June: Implementation period ends for loans taken out from 1 April 2014
- 31 August: Deadline for older agreements
After these dates, lenders will have three months to inform customers whether they are owed compensation and how much.
A long-awaited resolution
The payouts relate to widespread concerns around hidden commissions, unfair contracts and misleading information given to car buyers over nearly two decades.
While earlier estimates suggested the scandal could cost tens of billions more, a Supreme Court ruling last year limited the scope of claims.
Even so, the scheme still represents one of the largest consumer compensation programmes in UK financial history.
Drivers who believe they may have been affected are being encouraged to act now by checking their paperwork and lodging a complaint.
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