Santander has agreed to pay compensation to thousands of drivers for its role in unfair car finance deals, as part of a broader industry scheme expected to cost multiple firms around £7.5 billion, with total administration costs reaching £9.1 billion.
Compensation Scheme Details
The Financial Conduct Authority (FCA) outlined the compensation scheme last month, prompting banks and lenders to assess the financial impact. Payouts are due on approximately 12.1 million motor finance deals, with an average of £829 per agreement. In an update on Saturday, Santander confirmed it would not challenge the FCA decision, joining Barclays, Lloyds Banking Group, and Close Brothers in accepting the scheme.
A Santander spokesperson stated: “We have decided not to challenge the schemes and will now focus on their implementation.” The bank added: “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.”
Eligibility and Payouts
The FCA expects millions of claims to be paid this year, with the vast majority settled by the end of 2027. Those who have already lodged complaints are likely to receive payments first. The compensation covers car finance agreements taken out between April 6, 2007, and November 1, 2024, where commission was paid by the lender to the broker.
Drivers may have been mis-sold if their agreement included a discretionary commission arrangement, a high rate or commission, or a contractual tie that was not properly disclosed. Initially, the FCA estimated average payouts of £700 per agreement, but this has increased to £829 after the regulator tightened eligibility, excluding loans with low commissions or zero interest rates. This means fewer drivers will qualify, but those who do will receive higher compensation.
How to Claim
The FCA urges affected individuals to submit a complaint directly to the lender that provided the car finance. Martin Lewis has warned against using claims management companies or law firms, as they typically take 30% of any compensation owed. Drivers are advised to contact their lender directly to ensure they receive the full amount.
