Compensation details for millions of drivers set to be revealed

Compensation details for millions of drivers set to be revealed
Millions of drivers will find out how they can claim compensation for mis-sold car finance when the financial regulator outlines its final rules on the scheme.
The Financial Conduct Authority (FCA) will publish its final decision late this afternoon, detailing the payout programme for 14 million motor finance agreements.
The long-running multi-billion pound saga, which has included a ruling at the UK's highest court, is likely to result in average compensation of payments of about £700 on a host of deals made between April 2007 and November 2024.
But the regulator's scheme could still face a legal challenge by lenders and claims management companies, further extending the wait for victims.
The payouts relate to commission arrangements between lenders and dealers, unfair contracts and inaccurate information given to car buyers.
The FCA has been working on a central scheme that would not require those mis-sold agreements to go to court, although some drivers may decide instead choose to pursue legal claims in court in the hope of bigger payouts.
The FCA previously estimated 44% of all motor finance agreements made from 2007 to late 2024 would be eligible for payouts, totalling more than £8bn. Lenders face a further £3bn of administrative costs.
A ruling at the Supreme Court in August limited the breadth of these cases, which otherwise could have extended to tens of billions of pounds.
The vast majority of new cars, and many second-hand ones, are bought with finance agreements.
In 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 said this provided an incentive for a buyer to be charged higher interest rates than necessary, leaving them paying too much.
The regulator, using the basis of court judgements, has also said other sales were unfair. They are:
- High commission arrangements - where the commission was equal to or greater than 35% of the total cost of credit and 10% of the loan
- Tied arrangements that gave a lender exclusivity or a first right of refusal, without drivers being clearly informed
The lenders' trade body has argued that these conclusions were too broad-brush, and compensation could be too generous.
"That would result in redress being paid to millions of customers who experienced no unfair relationship, or no loss, diverting resources away from those for whom redress is genuinely due," the Finance and Leasing Association (FLA) has said.
Major lenders, including Lloyds - the UK's biggest banking group, have set aside billions of pounds already. Close Brothers has cut hundreds of jobs owing to its exposure to the compensation scheme.
Long wait for drivers
Many drivers have waited years for payouts, since DLAs were banned in 2021, and some agreements now date back almost 20 years.
Thousands have already made complaints, or started court claims, only to see their cases put on hold until the FCA completes its work.
The regulator had wanted the compensation scheme to be up and running by early 2026, but delays and extended consultation following pressure from lenders have pushed back the date.
A further concession has allowed for an implementation period of three to five months before lenders need to contact customers who may be eligible.
For the most part, current proposals suggest drivers will be contacted by their lender to invite them to make a claim. Those who have already made a claim should receive an offer, and a payout, earlier.
However, that could be further delayed if lenders or claims management companies challenge the FCA's final decision.
They have 28 days to present a legal challenge to a tribunal, which could then go to a higher court for a decision, before any payouts were made.