Millions of UK motorists could receive compensation for mis-sold car finance deals more quickly, after the financial watchdog brought a key deadline forward by two months.
FCA Accelerates Complaint Handling Process
The Financial Conduct Authority (FCA) has announced that motor finance firms must now start handling customer complaints from 31 May, rather than the originally proposed date of 31 July. This move accelerates the timeline for potentially millions of drivers seeking redress in the widespread car finance mis-selling scandal.
The regulator had previously paused the requirement for firms to respond to these complaints in January 2024, although investigations were allowed to continue. The FCA stated that bringing the deadline forward gives companies "sufficient time to be ready to respond" once the formal compensation scheme is finalised.
Who is Eligible for Compensation?
The proposed redress scheme is set to compensate drivers who were unfairly sold car loans between 2007 and 2024. The core issue revolves around customers not being properly informed about the size of commissions paid to brokers, such as car dealers, which could have influenced the interest rates they were offered.
It is estimated that around 14 million finance deals could be eligible for review under the scheme. While final details are still being consulted on, it is hoped that affected motorists could receive payouts averaging around £700. The scheme is expected to launch early next year.
Industry Pushback and Next Steps
The regulator's plans have faced significant pushback from lenders concerned about the scale and cost of the proposed compensation. However, the FCA has indicated it is likely to proceed with the scheme, stating complaints will be dealt with under specific rules with set timeframes.
In a December update, the FCA noted that while it expects the "majority of complaints will fall within the scope of its redress scheme", firms must also prepare to handle cases that fall outside its boundaries. The scandal, which has been highlighted by consumer champions including Martin Lewis, represents one of the largest financial redress programmes in recent years for UK consumers.
