Millions of British motorists caught up in the car finance mis-selling scandal could be systematically short-changed by a compensation scheme that critics are calling a "£4 billion betrayal" of consumers.
Compensation Scheme Under Fire
The Financial Conduct Authority's proposed redress plan, designed to handle claims from the massive PCP finance mis-selling scandal, is facing unprecedented criticism from consumer groups, MPs, and financial experts. The scheme, which would automatically determine payouts, is accused of potentially denying victims up to £4 billion they would otherwise receive through individual claims.
How the System Fails Consumers
Analysis reveals the proposed collective scheme would calculate compensation based on average losses rather than individual circumstances. This approach could see many victims receiving significantly less than they're entitled to, particularly those who paid the highest commissions or were sold the most inappropriate products.
Consumer rights champion James Daley of Fairer Finance didn't mince words: "This is a classic case of a regulator putting the interests of big business ahead of ordinary consumers. The FCA is essentially helping lenders avoid paying the full price for their misconduct."
The Scale of the Scandal
The car finance mis-selling scandal affects an estimated hundreds of thousands of consumers who were sold finance agreements between 2007 and 2021 without being properly informed about hidden commission arrangements. Many customers paid significantly more for their vehicles because brokers received secret kickbacks from lenders.
Political Backlash Grows
Cross-party MPs are now demanding the FCA reconsider its approach. The Treasury Select Committee has expressed serious concerns about whether the scheme truly serves consumer interests, with one committee member describing it as "robbing Peter to pay Paul, but keeping most of the money in the bank's pocket."
What's at Stake for Consumers
- Reduced Compensation: Individual claims could yield thousands per customer, while the scheme might pay hundreds
- Lost Rights: Accepting scheme payments could prevent further legal action
- Time Pressure: Consumers face difficult decisions with limited information
- Complex Calculations: The FCA's formula may not account for individual financial harm
As one affected motorist told investigators: "I feel like I'm being mugged twice - first by the finance company, now by the system that's supposed to protect me."
The FCA maintains the scheme will provide quicker, simpler compensation to more people, but with billions potentially staying in lenders' pockets rather than reaching wronged consumers, the battle over Britain's biggest consumer finance scandal is far from over.
