Nikhil Rathi, CEO of the Financial Conduct Authority (FCA), has informed MPs that discussions are underway with lenders to secure "full and final settlement" for millions affected by the car finance mis-selling scandal. The average compensation per finance deal is expected to be £830, according to the regulator's earlier announcement.
Update to Treasury Committee
Speaking to the Treasury Committee, Rathi emphasized the urgency of resolving the issue, stating that many people "need this money now" amid the cost-of-living crisis. The FCA had previously mandated two redress schemes covering approximately 12 million car finance agreements sold between April 2007 and November 2024, where customers were not properly informed about commission arrangements.
These include discretionary commission arrangements (DCAs), high commission arrangements (where commission exceeded 39% of total credit cost and 10% of the loan), and contractual ties limiting broker options. However, payouts originally slated for July 2026 are on hold due to three legal challenges, pushing compensation to at least 2027.
Progress and Next Steps
Rathi confirmed that his team is engaging with lenders and claims law firms to allow consumers to accept compensation under the scheme as a full and final settlement. He added: "There are millions of people in a difficult cost-of-living situation who need this money now."
Under the scheme, finance firms must review records and contact affected customers. Individuals who believe they were mis-sold can also file complaints directly. Rathi noted that those deemed ineligible for redress will receive responses soon and can challenge decisions via the Financial Ombudsman Service.
Lenders Under Pressure
The FCA boss stressed that lenders must be prepared for all scenarios, holding them accountable for historical wrongs. "We are holding the lenders' feet to the fire to make sure that they have provisions, that they have capital in the United Kingdom to make sure they are ready to deal with all scenarios," he said. "They've had many years now to prepare."
Eligibility for Compensation
Consumers may be eligible if they took out car finance for a motor vehicle (car, motorbike, van, or campervan) between April 6, 2007, and November 1, 2024, and were not informed about specific commission arrangements, including DCAs, high commission arrangements, or contractual ties restricting lender choice.
