FCA seeks compensation scheme for affected motorists

The FCA aims to set up a scheme compensating motorists affected by past finance practices.

FCA plans compensation scheme for drivers affected by car finance scandal

The Financial Conduct Authority (FCA) is exploring a compensation scheme for thousands of motorists who participated in car finance arrangements prior to 2021. In a statement released on Sunday, the FCA disclosed that its investigation found that many financial firms had failed to comply with legal standards and disclosure requirements while selling loans. The cost of this scheme is expected to be significant, with estimates starting at £9 billion, reaching as high as £13.5 billion. Individuals affected might see compensation averaging less than £950. With a consultation expected to be published by early October, the FCA assures that the compensation process will be straightforward, allowing consumers to avoid unnecessary fees from claims management companies. This announcement follows a recent Supreme Court ruling that addressed similar issues regarding undisclosed commission payments between car dealers and financial brokers. A substantial number of car finance deals, around 40%, may have included contentious discretionary commission arrangements, further complicating the landscape for affected consumers.

The FCA's proposed compensation scheme reflects a critical step in addressing past injustices in car financing. It highlights the growing scrutiny on financial practices that have historically put consumers at a disadvantage. As the agency navigates the complexities of compensation logistics, it faces the challenge of balancing financial implications for firms against the need for accountability. The fresh ruling from the Supreme Court strengthens the call for transparency in commission arrangements, amplifying the urgency for the FCA to act decisively. This situation shines a light on widespread issues within the auto finance industry, pushing for reforms that could reshape how transactions are conducted in the future.

Highlights

The FCA's actions could reshape consumer trust in car financing.