Low-income drivers who relied on loans for cheaper cars are more likely to miss out on compensation under the Financial Conduct Authority's (FCA) car finance redress scheme, according to analysis by law firm Slater and Gordon.
Around 1.1 million low-value car finance agreements will not be eligible for redress because they involve commissions of £120 or less (before April 2014) or £150 or less (after that date). The FCA considers these amounts unlikely to have influenced the consumer's decision or broker's behaviour.
However, Slater and Gordon argues that smaller loans—often a few thousand pounds or less—are typically used to buy cheaper cars, disproportionately affecting financially stretched consumers. Elizabeth Comley, the firm's chief operating officer, said: 'The people being cut out are those at the lower end of the market – drivers who borrowed smaller amounts to buy cheaper cars and who can least afford to lose out.'
The FCA scheme, set up to compensate consumers mis-sold car loans between April 2007 and November 2024 due to hidden commission, is currently in limbo. It faces legal challenges from both consumer group Consumer Voice, which argues it short-changes drivers, and three lenders unhappy with the £9.1 billion cost.
An FCA spokeswoman defended the scheme, stating: 'Very low levels of commission are unlikely to have influenced the consumer’s decision or the broker’s behaviour – so it’s right they aren’t considered for compensation.' The watchdog continues to advise consumers to complain directly to lenders if they believe they are owed compensation.
