Motor finance customers could receive payout as FCA will consult on scheme
Many motor finance firms were not complying with rules or the law by not providing customers with relevant information about commission paid by lenders to the car dealers who sold the loans, the FCA said.
It comes after Friday's ruling by the Supreme Court on cases in which the FCA had intervened.
While some motor finance customers will not get compensation because in many cases commission payments were legal, the court ruled that in certain circumstances the failure to properly disclose commission arrangements could be unfair and therefore unlawful, the FCA added.
The UK's highest court ruled that car dealers did not have a relationship with their customers that would require them to act 'altruistically' in the customers' interest.
Nikhil Rathi, chief executive of the FCA, said: 'It is clear that some firms have broken the law and our rules. It's fair for their customers to be compensated.
'We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.
'Our aim is a compensation scheme that's fair and easy to participate in, so there's no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.
'It will take time to establish a scheme but we hope to start getting people any money they are owed next year.'
The FCA currently estimates that most individuals will probably receive less than £950 in compensation.
The final total cost of any compensation scheme is currently estimated to be between £9 billion and £18 billion, the FCA added.
The consultation will launch by early October. If the compensation scheme goes ahead, the first payments should be made in 2026.
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