The Financial Conduct Authority (FCA) has published the final details of its compensation scheme for victims of the car finance scandal, with average payouts expected to be £830 per eligible contract. The regulator reduced the number of loan agreements covered from 14 million to 12.1 million, narrowing the scope of the scheme.
The scheme, covering loans agreed between 2007 and 2024, aims to compensate drivers overcharged due to commission arrangements between lenders and car dealers. The FCA estimates that roughly 75% of eligible consumers will make a claim, resulting in total compensation of approximately £7.5 billion, down from the initial £8.2 billion proposal.
FCA Chief Executive Nikhil Rathi stated that the final terms balance fairness for consumers and proportionality for firms, adding that the scheme will put £7.5 billion back into people's pockets. He warned firms against challenging the scheme in court, saying payouts should not be delayed further.
Firms have until 27 April to challenge the scheme, which could delay compensation. The Financing and Leasing Association (FLA) has not ruled out legal action, while claims law firm Courmacs Legal criticised the scheme as a 'complete failure for consumer rights'. The FCA and lenders advise consumers to use the free scheme rather than claims management companies that charge up to 33% in fees.
Under current plans, millions of victims are expected to receive compensation by the end of 2026. The scheme's release after market close on Monday aims to avoid share price volatility for major lenders including Lloyds, Santander, Barclays, and Close Brothers.
