Britons who suspect they were wrongly sold car finance from 2007 to 2024 could potentially receive an average compensation of around £1,400 per customer. The Financial Conduct Authority (FCA) has proposed a compensation scheme that could lead to over £8 billion in payouts for car buyers. The FCA projected that banks and car manufacturers’ finance divisions might have to pay out billions to compensate customers affected by undisclosed commissions during the period of April 2007 to November 2024. These customers were not adequately informed about the commissions that lenders paid to brokers, typically car dealers.
The expected total amount for compensation is £8.2 billion. If you suspect you may have been a victim of mis-sold car finance during that timeframe, Locksley Law offers a free, no-obligation agreement check.
Financial institutions are preparing for significant payouts, with Close Brothers setting aside £165 million, Santander earmarking £295 million, Lloyds allocating £1.95 billion, and carmakers like Mercedes-Benz and BMW reserving over £500 million.
The car finance scandal came to light when it was discovered that certain lenders were providing undisclosed “secret” commissions to dealerships. This system allowed dealers to manipulate interest rates on finance agreements, with higher rates resulting in larger commissions. Consequently, many customers may have agreed to finance deals with inflated interest charges.
The FCA’s investigation revealed that 44% of car finance agreements sold between April 2007 and November 2024 might be deemed unfair due to inadequate disclosure. The regulator stated that motor finance firms violated laws and regulations by failing to disclose crucial information, leading to unfair practices and consumers being denied opportunities to negotiate better deals or paying more for their loans.
A ruling by the Court of Appeal in 2024 raised the possibility of significant compensation obligations for lenders, with potential costs reaching up to £44 billion according to industry estimates. However, the Supreme Court overturned a substantial portion of that ruling last year, reducing lender liability.
Following the court decision, the FCA is expected to outline the rules for a proposed redress scheme. Under this scheme, lenders may be required to pay out £8.2 billion, with some estimates going as high as £11 billion. Affected customers could receive an average compensation of approximately £700 per claim, with Locksley Law customers having an average of 2.6 claims each, potentially resulting in payouts of up to £1,400 or more.
Individuals who believe they were victims of mis-sold car finance agreements between April 2007 and November 2024 may be eligible to make a claim. The FCA is planning to introduce a free redress scheme in 2026, although participation is not mandatory. Consumers can opt to pursue legal action through the courts instead and are not obligated to use a law firm or claims management company.
If you had a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement during the specified period, Locksley Law can conduct a complimentary agreement check to determine if you are entitled to compensation averaging £700. Visit www.locksleylaw.co.uk for more information.
For those preferring the FCA scheme, the regulator provides a template letter on its website for affected drivers to use. The FCA’s website offers guidance for individuals who believe they were victims of mis-sold car, motorbike, or van finance agreements during the relevant period. Lenders will reach out to eligible customers with further instructions once the scheme is operational.