Millions of motorists are set to receive information about the highly anticipated car finance compensation program tomorrow. The Financial Conduct Authority (FCA) has estimated potential payouts ranging from £9 billion to £18 billion. The FCA will release a consultation and statement on a proposed motor finance redress scheme after the stock markets close at 4.30 pm.
Martin Lewis, a consumer advocate from Moneysavingexpert.com, suggests that as many as 14 million individuals may be eligible for compensation due to some motor dealers not disclosing commission earnings from lenders on certain car finance deals. The FCA intervened following a Supreme Court ruling that shed light on another issue that could expand the pool of eligible recipients.
If the scheme progresses after the consultation phase, initial payments could commence next year. The FCA anticipates that the majority of claimants will likely receive compensation amounts below £950. Nikhil Rathi, the FCA’s chief executive, emphasized the importance of a fair and accessible compensation scheme to prevent unnecessary costs associated with claims management companies or legal representation.
Adrian Dally, the director of motor financing at the Financing and Leasing Association, has raised concerns about the FCA’s projected payout figures, questioning their validity. The FCA is expected to disclose their calculations alongside the official statement.
While details of the redress scheme are still being finalized, individuals who feel wronged are encouraged to raise complaints with their financial institutions. The potential for compensation remains subject to the forthcoming consultation process and may vary depending on individual circumstances.
Martin Lewis estimates a substantial number of people could qualify for compensation, particularly if discretionary commission arrangements were involved in their financing agreements. The scheme is likely to apply to vehicles purchased on finance between 2007 and 2021, with a focus on addressing unfair practices related to commission structures.
The FCA plans to consult on an interest rate for compensatory payments, indicating a potential rate of 3% per annum based on the average base rate plus 1%. The consultation will also address the structure of the scheme, including opt-out or opt-in options for claimants.
The total cost and design of the compensation scheme are key factors that will influence the final payout amounts. The FCA acknowledges the complexity of balancing accountability with maintaining a healthy lending environment and avoiding adverse impacts on the automotive industry and the economy.