FridayOL

Millions of UK motor finance customers are poised to potentially receive compensation following a widespread mis-selling scandal. The Financial Conduct Authority (FCA) has announced it will consult on an industry-wide compensation scheme designed to address historical issues with how motor finance agreements were sold.

What Happened?

The scandal revolves around the way firms calculated and disclosed commission paid to car dealerships when customers took out motor finance agreements between 2008 and 2020. The FCA found that some firms didn't properly inform customers that dealerships received commission based on the interest rates they were charged, potentially leading customers to pay more than they should have.

The FCA's Action and Compensation Scheme

After a lengthy investigation and redress scheme, the FCA has determined that an industry-funded compensation scheme is the most efficient and effective way to compensate affected customers. The consultation process will determine the final structure and operation of the scheme, including eligibility criteria and the claims process. This is a significant move aimed at providing a streamlined route to compensation for those who believe they were mis-sold motor finance.

How Much Compensation Could You Receive?

While the exact amount of compensation will vary depending on individual circumstances, the FCA currently estimates that the majority of eligible individuals will likely receive less than £950. However, some customers who suffered significant financial losses could receive considerably more. The FCA’s initial estimates suggest a total compensation bill could reach billions of pounds, impacting motor finance providers significantly.

Who is Eligible?

To be eligible for compensation, customers must have taken out a motor finance agreement between April 2008 and March 2020 and believe they were mis-sold the agreement due to the undisclosed commission structure. The FCA will provide more detailed guidance on eligibility criteria during the consultation period.

What's Next?

• Consultation Period: The FCA will launch a consultation period allowing industry stakeholders and consumers to provide feedback on the proposed compensation scheme.
• Scheme Implementation: Following the consultation, the FCA will finalize the scheme’s design and implementation plan.
• Claims Process: A formal claims process will be established, allowing eligible customers to submit claims for compensation.

Important Note: Consumers are advised not to submit claims directly to motor finance providers at this time. The FCA will announce the official claims process once the compensation scheme is finalized. Keep an eye on the FCA website (https://www.fca.org.uk/) for updates and further information.

This development represents a crucial step towards resolving the motor finance mis-selling scandal and providing redress to affected consumers. The FCA’s consultation is a chance for everyone to contribute to ensuring the scheme is fair and effective.