FCA proposes industrywide scheme to compensate missold motor finance

The Financial Conduct Authority has proposed an industrywide compensation scheme for motorists who were missold car finance, saying payouts on roughly 14 million agreements could begin early next year and would average about £700 each. The regulator estimated the redress bill at about £8.2 billion and said it hopes payments will be underway by the start of 2026, while launching a consultation on the scheme’s details and implementation.

The FCA said lenders breached rules by failing to disclose commission arrangements, most notably discretionary commission arrangements, which allowed dealers to influence the interest rate charged to customers. That practice, the regulator found, meant many buyers did not have the opportunity to negotiate or seek a better deal and may have paid higher rates. The scheme covers many personal contract purchase and hire purchase agreements taken out between April 2007 and November 2024, though personal contract hire deals are excluded.

FCA chief executive Nikhil Rathi said, "Many motor finance lenders did not comply with the law or the rules," and added the regulator’s aim was to make compensation simple for customers and straightforward for firms to...