FCA Announces £7.5 Billion Car Finance Redress Scheme

The Financial Conduct Authority announced on Monday a comprehensive redress scheme to compensate millions of UK consumers affected by missold car finance agreements dating back to 2007, with average payouts expected to reach around 829 pounds per eligible deal.

The scheme targets approximately 12.1 million personal contract purchase or hire purchase agreements for cars, vans, motorbikes, or campervans used for personal purposes, entered into between April 6, 2007, and November 1, 2024. At its core is the issue of discretionary commission arrangements, under which car dealers received payments from lenders based on the interest rates charged to customers, often resulting in higher costs for buyers without their knowledge. These practices were banned by the FCA in 2021 following regulatory scrutiny and legal challenges, including the Supreme Court's ruling in the Johnson v FirstRand case that upheld the potential for such commissions to create unfair relationships.

Under the plan, lenders must proactively identify and contact eligible customers, marking a shift from complaint-based redress to a broader outreach effort. The FCA estimates that 75 percent of those eligible will claim...