The Financial Conduct Authority (FCA) has announced final plans for a redress scheme that could see millions of consumers receive compensation for mis-sold car loans. The average payout is expected to be £829, higher than the £700 initially estimated, but the number of eligible deals has been reduced from 14.2 million to 12.1 million.
The total redress paid under the scheme is estimated at £7.5 billion, down from a previous estimate of £8.2 billion. The FCA expects around 75% of eligible consumers to make a claim, with most payments settled by the end of 2027. FCA chief executive Nikhil Rathi said the scheme is designed to be fair for consumers and proportionate for firms, putting money back into people's pockets.
The scheme covers motor finance agreements involving discretionary commission arrangements (DCAs), which were banned in 2021. Under these arrangements, brokers could increase interest rates to earn higher commissions, often without customers' knowledge. Eligible agreements were taken out between April 6, 2007, and November 1, 2024.
The FCA tightened eligibility criteria after feedback from lenders, consumer groups, and industry bodies. Deals with minimal commission—£120 or less before April 1, 2014, and £150 or less after—are considered fair and not eligible. The regulator expects about a third of cases to be capped to prevent overpayment.
Lenders can start payments immediately, with those who have already complained likely to be paid first. Consumer groups have mixed reactions: Fairer Finance welcomed the scheme, while Consumer Voice expressed concerns that many people may still be undercompensated.
