Car finance redress bill cut by 2bn as VCA unveils final compensation scheme

"The Financial Conduct Authority stated that total compensation and administration costs will now amount to roughly £9.1 billion, down from earlier estimates of more than £11 billion. This revised figure includes £7.5 billion in direct payouts to consumers and £1.6 billion in operational costs for lenders."

"The reduction has been achieved largely by tightening eligibility criteria. Around 12.1 million finance agreements signed between 2007 and 2024 will now fall within scope of the scheme, compared with 14.2 million under the regulator's initial proposals last autumn."

"Despite the lower overall bill, the FCA expects the average compensation payment to increase. Eligible consumers are projected to receive around £829 per agreement, up from an earlier estimate of approximately £700."

"At the centre of the scandal are commission arrangements between lenders and car dealers that were not properly disclosed to borrowers, potentially inflating the cost of loans. The FCA banned certain types of commission structures in 2021, but growing complaints prompted a wider investigation launched in 2024."

The FCA has revised the total compensation and administration costs for the car finance mis-selling scandal to approximately £9.1 billion, down from over £11 billion. This reduction is primarily due to stricter eligibility criteria, with 12.1 million finance agreements now included. The average compensation payment is expected to rise to around £829 per agreement. The FCA anticipates that about 75% of eligible customers will file claims, although this may depend on the claims process's simplicity. The scandal involves undisclosed commission arrangements between lenders and car dealers.

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