The Financial Conduct Authority (FCA) has estimated that drivers across the UK could receive an average of £700 per motor finance agreement, following a compensation scheme proposed by the regulator.
The FCA estimates that total compensation from lenders could reach approximately £8.2 billion, covering around 14 million potentially unfair policies. Payments are anticipated to start next year.
Investigations found that motor finance companies breached laws by failing to disclose key information. This lack of transparency incentivised salespeople to charge higher interest rates to boost their commission, which prevented consumers from negotiating better terms and often resulted in higher loan costs. The FCA proposes a streamlined compensation scheme to efficiently deliver redress to affected individuals.
Research commissioned by the FCA highlighted that 46% of people aware of potential compensation were deterred from claiming due to uncertainty about eligibility, while 24% were put off by unclear expectations around the amount they might receive. Crucially, 81% of those considering a claim said a formal compensation scheme would give them the confidence to proceed.
Nikhil Rathi, chief executive of the FCA, said: “Many motor finance lenders did not comply with the law or the rules. Now we have legal clarity, it’s time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.”
He added: “On such a complex issue, not everyone will get everything they would like. But we want to work together on the best possible scheme and draw a line under this issue quickly. That certainty is vital, so a trusted motor finance market can continue to serve millions of families every year.”
Source: RAC
graham+cox
bad idea all round
we as garages are going to have to pick the insurance bill up in our costs
thease people getting finance on things they can not afford need to take a step back and live within there means