Millions of drivers are set to receive information about a highly anticipated car finance compensation program on Monday. The scheme aims to compensate individuals who were sold car finance agreements deemed unfair between April 6, 2007, and November 1, 2024. Factors that may indicate mis-selling include undisclosed commission arrangements, high rates or commissions, and undisclosed contractual ties. The Financial Conduct Authority (FCA) estimates that approximately 14 million agreements may qualify for compensation due to being unjust.
The anticipated average refund per agreement is around £700, although this amount may vary depending on individual circumstances. The total industry cost for the scheme, encompassing all payments and operational expenses, is estimated at £11 billion. Some lenders and car finance providers have expressed concerns over the proposed compensation amounts, citing them as excessively high.
The final specifics of the compensation scheme will be disclosed by the FCA after the market closes on Monday. Despite outlining initial plans last year, the FCA received over 1,000 responses during the consultation phase, prompting potential adjustments to the scheme. The FCA advises affected individuals to lodge complaints with their car finance provider to initiate the compensation process.
Experts such as Martin Lewis recommend against engaging claims management companies or law firms, as they typically charge a substantial portion of any owed compensation. Financial health expert Craig Tebbutt notes that while the expected average compensation per agreement is around £700, the comprehensive details regarding the scale, scope, and timeline will be confirmed soon.
The FCA has outlined a three-month implementation period for lenders to disburse compensation, extending up to five months for older motor finance agreements. Individuals who have already filed complaints can expect to receive notifications within three months of the implementation period’s conclusion, detailing the owed compensation amount. Acceptance of the proposed figure will lead to the timely disbursement of the compensation, which the FCA aims to complete by the end of 2026.
Furthermore, the FCA announced plans to eliminate the opt-out option from the scheme and will not mandate lenders to correspond with customers via recorded delivery.