The Financial Conduct Authority (FCA) has announced final plans for a redress scheme that will compensate millions of motorists mis-sold car loans, with an average payout of £829 per person. The scheme covers approximately 12.1 million unfair motor finance deals, with total redress expected to reach £7.5 billion.
The final payout is higher than the £700 initially estimated, but the number of eligible deals has been reduced by around two million from earlier proposals. The FCA expects about 75% of eligible consumers to make a claim, with most payments settled by the end of 2027.
The scheme addresses discretionary commission arrangements (DCAs), banned in 2021, where brokers could increase interest rates to earn higher commissions without informing customers. Compensation applies to agreements made between April 6, 2007, and November 1, 2024, where customers were not properly informed about high commissions or contractual ties.
FCA chief executive Nikhil Rathi stated: “We’ve listened to feedback to make sure the scheme is fair for consumers and proportionate for firms. It will put £7.5 billion back into people’s pockets.” He urged swift action to avoid further delays, especially amid rising household costs.
Eligibility criteria have been tightened following over 1,000 consultation responses. Deals with minimal commission—£120 or less before April 2014, and £150 or less after—are considered fair and excluded. The FCA expects around a third of cases to be capped to prevent overpayment.
Lenders can begin payments immediately, with priority given to those who have already complained. Consumer groups expressed mixed reactions: Fairer Finance welcomed the scheme, while Consumer Voice raised concerns that narrowed eligibility may leave many undercompensated.
