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Yahoo
an hour ago
- Yahoo
FCA considering compensation scheme over car finance scandal - raising hopes of payouts for motorists
Thousands of motorists who bought cars on finance before 2021 could be set for payouts as the Financial Conduct Authority (FCA) has said it will consult on a compensation scheme.
Yahoo
an hour ago
- Yahoo
FCA considering compensation scheme over car finance scandal - raising hopes of payouts for motorists
Thousands of motorists who bought cars on finance before 2021 could be set for payouts as the Financial Conduct Authority (FCA) has said it will consult on a compensation scheme. In a statement released on Sunday, the FCA said its review of the past use of motor finance "has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers". "Where consumers have lost out, they should be appropriately compensated in an orderly, consistent and efficient way," the statement continued. The FCA said it estimates the cost of any scheme, including compensation and administrative costs, to be no lower than £9bn - adding that a total cost of £13.5bn is "more plausible". The consultation will be published by early October and any scheme will be finalised in time for people to start receiving compensation next year. The announcement comes after on a separate, but similar, case on Friday. The court overturned a ruling that would have meant millions of motorists could have been due compensation for over "secret" commission payments made to car dealers as part of finance arrangements. Read more: The FCA's case concerns discretionary commission arrangements (DCAs) - a practice banned in 2021. Under these arrangements, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it. This is said to have then incentivised sellers to maximise interest rates. In light of the Supreme Court's judgment, any compensation scheme could also cover non-discretionary commission arrangements, the FCA has said. These arrangements are ones where the buyer's interest rate did not impact the dealer's commission. This is because part of the court's ruling "makes clear that non-disclosure of other facts relating to the commission can make the relationship [between a salesperson and buyer] unfair," it said. While it's unclear exactly how many motorists could be eligible for any compensation, it was previously estimated that about 40% of car finance deals included DCAs.
Yahoo
an hour ago
- Yahoo
Motor finance customers could receive payout as FCA will consult on scheme
Motor finance customers could receive a payout after the Financial Conduct Authority (FCA) announced it will consult on an industry-wide compensation 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.
