Millions of motorists across the UK are set to receive compensation after the Financial Conduct Authority (FCA) launched a major redress scheme targeting mis-sold car finance agreements.
The regulator estimates that around 14 million drivers were affected, with an average payout of about £830. The total compensation bill for financial firms could reach £7.5 billion.
Who Is Eligible
The scheme applies to car finance agreements made between April 6, 2007, and November 1, 2024.
Customers who were impacted will not need to apply immediately, as firms are required to identify affected individuals and contact them directly by December 2026.
What Went Wrong
The issue centres on the use of so-called discretionary commission arrangements, where brokers were allowed to adjust interest rates.
This often resulted in customers being charged higher rates than necessary, increasing the overall cost of their car finance deals.
Regulator Steps In
The FCA says the compensation process will be straightforward and free, warning consumers not to rely on third-party claims companies.
A dedicated taskforce has also been set up to tackle poor practices among claims management firms and legal representatives seeking to profit from the situation.
What to Expect
Affected drivers can expect to be contacted directly by lenders, outlining whether they qualify for compensation and how much they may receive.
The scheme is one of the largest consumer redress efforts in the UK financial sector in recent years.
