Are you a car owner who financed your vehicle in recent years? You could be entitled to compensation as part of a major investigation into motor finance mis-selling. The Financial Conduct Authority (FCA) is launching a consultation on a widespread redress scheme following evidence that some car dealerships were unfairly incentivised to sell certain finance products.

What Happened?

The FCA’s investigation revealed a concerning practice where motor dealers received commissions from the finance providers (banks and lenders) based on the type of finance product they sold, rather than simply the volume of sales. This created a potential conflict of interest, as dealerships might have been encouraged to push customers towards more expensive or unsuitable finance deals to maximise their own profits. This practice, known as discretionary commission arrangements (DCAs), has been deemed unfair by the regulator.

Who Is Affected?

The FCA estimates that millions of drivers could be affected by this mis-selling scandal. If you took out car finance between April 2008 and January 2020 and paid higher interest rates or charges than you would have otherwise, you might be eligible for compensation.

How Much Could You Get?

The amount of compensation you could receive varies depending on the level of mis-selling and the financial impact it had on you. The FCA estimates that payouts could range from a few pounds to as much as £950 per affected customer. The calculation typically involves looking at the difference between what you paid in interest and charges and what you should have paid had the dealership acted fairly.

What's Next?

The FCA's consultation will run until early 2024, and will seek views on the proposed redress scheme. This includes how compensation will be calculated and distributed. Following the consultation, the FCA will finalise the scheme and begin the process of identifying and contacting affected customers.

How to Check If You're Affected:

• Review Your Finance Agreement: Look at your original finance agreement to see when you took out the loan and what interest rate you agreed to.
• Consider Your Circumstances: Think about whether you were pressured into accepting a particular finance product or if you were given misleading information.
• Stay Informed: Keep an eye on the FCA website (https://www.fca.org.uk/) for updates on the redress scheme.

Important Note: While many firms are proactively contacting customers they believe may be affected, it’s crucial to be vigilant and check your eligibility. Don't wait for them to contact you – take the initiative and investigate your options.

This motor finance mis-selling scandal represents a significant opportunity for drivers to reclaim money they may have been unfairly charged. The FCA’s intervention is a welcome step towards ensuring fairness and transparency in the car finance industry.