Are you an Aussie who financed a car through a dealership? You might be entitled to compensation following a major review of motor finance practices. The Financial Conduct Authority (FCA) in the UK has announced it will consult on a proposed industry-wide compensation scheme, and this could impact Aussies who purchased vehicles through UK-linked dealerships.

What's the Issue? The FCA has identified widespread failings in how dealerships sold motor finance between 2008 and 2020. These failings primarily relate to how commissions were earned by brokers and dealerships. Essentially, dealerships were incentivized to push higher-priced finance deals onto customers, often without clearly disclosing the true cost or potential risks. This resulted in many customers paying more for their car loans than they should have.

The Compensation Scheme: A Breakdown The FCA's proposed scheme aims to provide redress to customers who were affected by these mis-selling practices. The consultation process will determine the exact details of the scheme, including eligibility criteria and how compensation will be calculated. While the FCA estimates that most individuals in the UK will likely receive less than £950 (approximately AU$1,500), the potential payout for those who suffered significant financial harm could be considerably higher. It's important to note that this is an estimate, and the final amount will depend on individual circumstances.

Who’s Affected in Australia? Many Australians purchased vehicles through dealerships that are linked to UK-based finance companies. If you financed a car through a dealership and believe you may have been mis-sold, it's crucial to investigate your options. The FCA’s review is focused on UK practices, but the fallout could have implications for Australian consumers who were similarly affected.

What Should You Do?

• Review your finance agreements: Look for any discrepancies or unclear terms related to commissions or fees.
• Gather documentation: Keep copies of your finance agreement, loan statements, and any correspondence with the dealership.
• Seek legal advice: Consult with a financial advisor or legal professional specializing in consumer finance to assess your eligibility and explore your options.
• Stay informed: Keep an eye on updates from the FCA and Australian consumer protection agencies regarding the scheme and potential implications for Australian consumers.

The FCA Consultation: What's Next? The FCA is now seeking feedback from industry stakeholders and consumers on the proposed compensation scheme. This consultation period is vital to ensure the scheme is fair, effective, and addresses the concerns of those affected. The final details of the scheme are expected to be announced later in 2024.

Disclaimer: This information is for general guidance only and does not constitute legal advice. Individuals should seek professional advice regarding their specific circumstances.