"Millions of motorists mis-sold car finance deals could receive average payouts of around £700, under a compensation scheme announced by the Financial Conduct Authority (FCA) on Tuesday. The regulator estimates that 14 million finance agreements between April 2007 and November 2024 were affected by unfair commission practices, leading to an expected £8.2 billion in redress and a potential £11 billion total bill once administrative costs are included."
"The scheme, which will cover loans issued through so-called discretionary commission arrangements (DCAs), is set to become the largest financial redress programme since the PPI mis-selling scandal. The investigation centres on discretionary commission arrangements, a type of car finance deal banned in 2021. Under these arrangements, lenders gave car dealers the power to set customer interest rates, rewarding them with higher commissions for charging more - a structure the FCA said "incentivised overcharging" and breached fair treatment rules."
"'Many motor finance lenders did not comply with the law or the rules,' said Nikhil Rathi, chief executive of the FCA. 'It's time their customers get fair compensation. Our scheme aims to be simple for people to use and lenders to implement.' The average payout per agreement is expected to be about £700, although the FCA said amounts will vary depending on loan size, interest rate and the time elapsed since overpayment."
An FCA scheme will compensate consumers affected by discretionary commission arrangements (DCAs) in car finance, covering agreements from April 2007 to November 2024. The regulator estimates 14 million agreements were affected, with expected redress of £8.2 billion and a potential £11 billion total including administrative costs. DCAs allowed dealers to set customer interest rates and receive higher commissions for charging more, a structure banned in 2021 and found to incentivise overcharging. Around 44% of car loans since 2007 reportedly included these arrangements. Average payouts are expected to be about £700, varying by loan size and duration, and some customers may receive multiple payments.
#discretionary-commission-arrangements #car-finance-mis-selling #consumer-compensation #fca-redress-scheme
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