The Financial Conduct Authority (FCA) has revealed millions of motorists are set for compensation after being ripped off by mis-sold car finance deals. Despite fewer agreements qualifying for payouts than first thought, the average compensation cheque will be bigger than predicted.
12.1 Million Motor Finance Deals Up for Redress
About 12.1 million car finance agreements will qualify for compensation, down from the original 14 million forecast. The FCA confirmed payments will begin rolling out this year. Though fewer deals made the cut, the average payout has jumped to £829 per customer – up from an initial £700 estimate.
Bill Hits £7.5 Billion as FCA Slashes Cost for Lenders
Overall, firms are expected to shell out around £7.5 billion to drivers – a drop from the £8.2 billion predicted during earlier consultations. The total cost to lenders has dipped from £11 billion down to £9.1 billion after the FCA tightened the scheme’s scope.
Who’s Eligible and Why?
- Deals struck between April 6, 2007, and November 1, 2024, are being examined.
- Loans where lenders paid commission to brokers could qualify.
- The FCA is running two separate schemes: one for agreements from 2007 to March 2014, another for 2014 to 2024.
The watchdog’s probe uncovered that brokers quietly hiked interest rates on car loans without telling customers. This allowed dealers to rake in secret commissions. These “discretionary commission arrangements” were banned in 2021 after being ruled unethical.
Legal Ruling Sets Redress in Motion
The Supreme Court’s landmark August 2025 ruling declared that hiding commission fees from buyers may be both unfair and illegal. Thousands of drivers unwittingly paid inflated interest rates, lining dealers’ pockets.
Following over 1,000 responses from last year’s consultation, the FCA tweaked its plans before unveiling the final redress scheme.
“Individual payouts will vary depending on the loan size and commission involved,” the FCA said, warning some motorists could get much more or less than £829.
This crackdown marks one of the biggest consumer compensation efforts in recent UK finance history – finally holding the car finance industry to account for dodgy dealings.
