The compensation scheme was set up after the Supreme Court ruled that some car finance firms broke the law or its rules by not properly informing customers about commission paid by lenders to the car dealers that sold them the loan.
The redress scheme follows a Supreme Court ruling that there was an “unfair relationship” under the Consumer Credit Act as a result of undisclosed (or partially disclosed) commissions paid by lenders to motor dealers in car finance deals.
“We hope that compensation, where it is due, can start to be paid next year,” he told MPs on the parliamentary Treasury Select Committee. He told them that during a period from 2007 through to 2020 there are around 30 million agreements who are eligible for compensation.
He said the FCA would carry out a consumer awareness campaign to alert motorists to the fact they may be due compensation. He said people who thought they might be affected should contact their lenders and “complain now,” he said.
MPs heard that the FCA has asked hundreds of claims management companies (CMCs) to remove adverts relating to motor finance redress stressing that average compensation payouts are likely to be much lower than advertised.
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He said: “Some of the CMCs and law firms are putting out high-pressured advertising suggesting to consumers they may get more than £4,500, and numbers like that.
“So we don’t agree with some of those very large estimates … we do think the average is likely to be hundreds, not thousands, of redress.”
The FCA will publish its consultation in the coming weeks and expects a “critical mass” of compensation claims to be dealt with in 2026.
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