Drivers may get compensation offers before car finance saga ends
The regulator says it supports lenders offering early compensation offers, as long as they are fair.
The Financial Conduct Authority (FCA) is expecting lenders to make early compensation offers to customers affected by the car finance mis-selling saga. The FCA believes offering compensation to some claimants ahead of the upcoming legal battle could provide a fair solution.
Barclays has confirmed it will start making early compensation offers, while other lenders are likely to follow suit. However, the FCA expects only a minority of claimants to receive early offers, with most having to wait for the outcome of a court case set to conclude next year.
FCA's general counsel and co-lead on the motor finance project, Stephen Braviner Roman, stated that fair settlement offers may allow some people to receive compensation sooner. Customers are not obligated to accept an early offer, and the FCA will closely monitor firms making offers, ensuring they are transparent about what accepting an offer entails.
The majority of new cars and many second-hand vehicles are purchased using finance agreements. Customers typically pay an initial deposit and monthly fees, which include interest. However, millions of drivers who took out car loans between April 2007 and November 2024 are eligible for compensation due to mis-sold loans, primarily related to discretionary commission arrangements (DCAs). These arrangements often involved dealers receiving commission based on the interest rate charged to customers.
The FCA anticipates average compensation payouts of around £829 for approximately 12 million car loans, accounting for about 37% of the total number of loans issued during the specified period. Compensation is expected to be paid in late next year, following the court case outcome.
Written by urgent.news from BBC Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
