Santander will begin paying customers £829 in compensation as part of the Financial Conduct Authority's (FCA) redress scheme for mis-sold motor finance. The bank confirmed its participation in the scheme, which addresses approximately 12.1 million mis-sold deals issued by various lenders, with an estimated £7.5 billion in total redress expected to be paid out.
Redress Scheme Details
The compensation program covers motor finance agreements taken out between April 6, 2007, and November 1, 2024. Most cases involve Discretionary Commission Arrangements (DCAs), a practice banned by the FCA in 2021, under which brokers and car dealers could inflate loan interest rates to increase their own commissions. The FCA found this created systemic unfairness as many customers were not informed of the arrangement and could not negotiate or access better rates.
The average payout is expected to be approximately £829 per eligible deal. Payments are beginning, with customers who have already filed complaints likely to be prioritised. The majority of claims are expected to be settled by the end of 2027.
Consultation and Reactions
The finalised scheme followed a consultation period that yielded more than 1,000 responses from consumer groups, MPs, lenders, and industry bodies. Consumer advocates argued the payouts were insufficient, while lenders claimed the financial burden was excessive and not reflective of actual consumer losses. In response, the FCA tightened eligibility criteria to ensure compensation is focused solely on those treated unfairly, and expects roughly one-third of cases to be subject to a payment cap to prevent overcompensation.
Santander's Statement
A Santander spokesperson 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." The lender added that it intends to continue working with regulators and policymakers to enhance the competitiveness of the UK motor finance sector in the interest of investors and consumers alike.
