Up to 14 million victims of the UK’s car finance scandal look likely to receive compensation payouts averaging £700.
The payouts would be less than previously expected, but announcing the plans for compensation on Tuesday, the Financial Conduct Authority (FCA) said that lenders could be landed with an £8.2bn compensation bill, though it could go as high as £9.7bn.
The City regulator’s long-awaited proposals for a compensation scheme cover millions of motor finance agreements taken out between April 2007 and November 2024.
This relates to the alleged large-scale mis-selling of car loans involved in the payment of “secret” commissions to car dealers, and millions of car buyers unknowingly paying more for their finance than they should have.
Launching a consultation, the FCA said that based on the number of consumers it estimated could take part in the scheme, lenders could be landed with an £8.2bn compensation bill, although it could go as high as £9.7bn.
The FCA said in August that it estimated “most individuals will probably receive less than £950 in compensation per agreement”. At that time it said it was unlikely the cost of the scheme would be much lower than £9bn, and could be up to £18bn.
The vast majority of new cars and an increasing number of used vehicles are bought with motor finance – typically either a personal contract purchase plan or a hire purchase agreement. In a typical year there are about 650,000 motor finance agreements in the new car market.
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This looks likely to be the biggest mass payout relating to a financial product since the payment protection insurance (PPI) mis-selling debacle, which led to 34 million consumers receiving an average of about £1,000 each.
