Santander has confirmed it will pay out £829 to eligible customers as part of the Financial Conduct Authority (FCA) motor finance redress scheme, with payments expected to begin in 2027.
Bank opts into FCA compensation scheme
The high street bank has decided to 'opt in' to the scheme rather than challenge it, meaning customers who took out an affected motor finance deal with Santander will be eligible for compensation once ongoing legal challenges are cleared.
The FCA is overseeing the compensation scheme for drivers who took out motor finance that was later found to have been mis-sold. Earlier this year, the regulator ruled that approximately 12.1 million finance deals were mis-sold by various lenders between 2007 and 2014.
Payout details and revised average
According to Money Saving Expert, a total of £7.5 billion is set to be paid out across the 12.1 million deals involving Discretionary Commission Arrangements (DCAs), which have since been banned. DCAs allowed car dealers and brokers to increase interest rates on loan deals and pocket the difference, without the borrower being made aware of the inflated rate.
The average payout was originally pegged at £700 but has now been revised upwards to an estimated £829 per affected customer. This is because roughly two million deals initially included in the scheme have now been excluded.
Timeline and legal challenges
The financial redress scheme remains open for applicants, and the money is expected to be fully paid out by the end of 2027. However, initial payments have been delayed from this year into 2027 following legal challenges.
Money expert Martin Lewis returned to ITV1 on October 14 with an update about when the car finance misselling scandal will finally be resolved with payouts for affected drivers. He told viewers: "Everyone's been waiting for this and the news came out today. This is about the FCA mass redress scheme for car finance misselling. We now have a court date announced for the legal challenge from four different firms who put this on hold just as it was about to start doing mass payouts."
He added: "They had a choice between December and February, they've gone for February unfortunately, which will delay it even more. Firms must process complaints now though but they needn't pay out, it's still on hold until after that. We'll do more on that in the future."
A spokesperson for Santander said: "We have decided not to challenge the schemes and will now focus on their implementation. This was a finely balanced judgment reflecting our primary desire to bring greater certainty to our customers, shareholders, and the wider motor finance sector—factors which outweighed our disagreement with elements of the proposed schemes."
