FCA issues compensation warning to millions of car owners
Millions of Brits are being urged to be aware of fraudsters posing as car finance lenders with fake compensation offers. The Financial Conduct Authority (FCA) has reported a recent surge in scammers attempting to extract personal details such as names, addresses, dates of birth and bank information by offering bogus compensation.
This warning comes after the FCA's announcement regarding a potential car finance compensation scheme. However, the city watchdog is keen to stress that no such scheme is currently in place.
The FCA has confirmed that car finance lenders are not contacting customers about compensation at this time. If you receive a call of this nature, the advice is to hang up immediately and refrain from sharing any personal information. Any scam calls or texts should be forwarded to 7726, reports the Daily Record.
Many banks are now utilising the easy-to-remember 159 phone number service, which connects worried customers directly to their bank if they've received suspicious contact.
Nisha Arora, director of special projects at the FCA, issued a stern warning: "We're aware of scammers calling people and posing as car finance lenders, offering fake compensation and asking for personal details. There is no compensation scheme in place yet. If anyone receives a call like this, hang up immediately and do not share any information."
The FCA has recently revealed plans to consult on a compensation scheme. It previously stated that many motor finance firms were flouting rules and laws by failing to provide customers with necessary information about commission paid by lenders to car dealers who sold the loans.
Car finance compensation in a nutshell
Motor finance customers could be in line for a payout following the FCA's announcement that it will consult on an industry-wide compensation scheme. The FCA has said that many motor finance firms were not adhering to rules or laws by not providing customers with relevant information about commission paid by lenders to the car dealers who sold the loans.
This follows a ruling by the Supreme Court on 1 August on cases where the FCA had intervened. While some motor finance customers won't receive compensation because in many instances commission payments were legal, the court ruled that in certain circumstances the failure to properly disclose commission arrangements could be deemed unfair and therefore unlawful, according to the FCA.
The FCA estimates that most individuals are likely to receive less than £950 in compensation. The final total cost of any compensation scheme is estimated to be between a whopping £9 billion and £18 billion.
The consultation is set to be launched by early October. If the compensation scheme gets the green light, the first payouts should be made in 2026. The FCA has reassured those who have already lodged complaints that they need not take any further action. If consumers suspect they weren't informed about commission and may have overpaid their car finance lender, they should lodge a complaint immediately.
The FCA also emphasised that there's no need to employ a claims management company or law firm, which could eat into any compensation by as much as 30%.
Consumer champion Martin Lewis recently advised his followers on X (formerly Twitter) that "there's no harm in putting a DIY complaint now to see if you had a Discretionary Commission Arrangement".
The FCA is set to propose guidelines on how lenders should "consistently, efficiently and fairly" determine whether a customer is due compensation and the amount owed. The regulatory body will keep a close eye on firms' adherence to these rules and will take action against any non-compliance.
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