Car Finance Mis-selling: Compensation Scheme Details Emerge
Millions of motorists who were victims of mis-sold car finance agreements may receive less than £950 (approximately $1200) per deal under a proposed compensation scheme. This follows a recent Supreme Court ruling regarding hidden commissions on car loans.
The Supreme Court's Friday ruling stated that while hidden commissions from lenders to dealers weren't inherently unlawful, it opened the door for compensation claims in cases of particularly large and unfair commissions. This has prompted the Financial Conduct Authority (FCA) to consider a payout scheme estimated to cost between £9bn and £18bn.
The FCA acknowledges the difficulty in precisely estimating the total cost but anticipates that millions could be eligible for compensation. The financial industry is expected to shoulder the full cost of the scheme, including administrative expenses.
Who is Eligible and What Should You Do?
If you've already filed a complaint, no further action is required. If you haven't, the FCA advises contacting your car loan provider directly rather than using a claims management company. The FCA intends to require firms to proactively inform customers about their potential eligibility and the necessary steps to take. Claims should cover agreements dating back to 2007.
However, the Finance & Leasing Association has expressed concerns about the feasibility of a fair redress scheme extending back to 2007, given that firms were not required to retain such dated information.
What's Next?
The FCA will launch a consultation in October to determine eligibility criteria and compensation amounts. They believe the Supreme Court ruling has provided needed clarity. The Supreme Court's decision reversed earlier rulings deeming hidden commissions on car loans unlawful. The case was brought by two plaintiffs.
- Key takeaway: Contact your car loan provider if you believe you were a victim of mis-sold car finance.
- Consultation: The FCA consultation begins in October.
- Timeline: Claims should cover agreements back to 2007.