Following a landmark Supreme Court ruling and subsequent action from regulators, millions of UK drivers may be entitled to compensation related to car finance agreements. This comprehensive scheme aims to address concerns around discretionary commission payments made to car dealerships, potentially impacting the interest rates customers paid. But who exactly is eligible, and how much could you receive?

The Background: What Happened?

The Supreme Court’s recent decision confirmed that certain types of discretionary commission arrangements used by car finance companies were unlawful. These arrangements, where dealerships received bonuses based on the sale of finance products, could have incentivized them to prioritize commission over offering customers the best possible finance deals. The Financial Conduct Authority (FCA) has since launched a compensation scheme to address the widespread impact of these practices.

Who is Eligible for Compensation?

To be eligible for compensation, you generally need to meet the following criteria:

• You took out a car finance agreement between April 2008 and January 2021.
• The agreement was a regulated consumer credit agreement (most personal car finance agreements fall under this).
• The agreement was affected by the unlawful discretionary commission arrangements.
• You’ve not already received redress for the same issue.

It's important to note that not everyone who meets these criteria will automatically receive compensation. The FCA will assess each claim individually, considering factors like the extent to which the commission arrangements affected your interest rate and the overall financial impact.

How Much Compensation Could You Receive?

The amount of compensation you could receive varies depending on the specifics of your case. Potential payouts could range from hundreds to thousands of pounds. The FCA will calculate compensation based on the difference between the interest you paid under the affected agreement and what you would have paid had the commission arrangements been lawful. Factors such as the length of the finance agreement and the amount borrowed will also play a role.

How to Claim Compensation

The FCA has established a dedicated portal for claims. Here’s a breakdown of the process:

1. Gather Your Information: Locate your car finance agreement and any relevant correspondence.
2. Visit the FCA Portal: Go to the official FCA compensation portal (link to be provided by FCA).
3. Submit Your Claim: Follow the instructions on the portal to submit your claim, providing all required information.
4. Await Assessment: The FCA will assess your claim and notify you of the outcome.

Important Deadlines

There is a deadline for submitting claims, so it’s crucial to act promptly. The FCA has announced a deadline of August 30, 2024, for submitting claims. Missing this deadline could mean losing your right to compensation.

Seeking Professional Advice

Navigating the claims process can be complex. Consider seeking advice from a financial advisor or specialist claims company to ensure you maximize your chances of a successful outcome. While these services may charge a fee, they can provide valuable assistance in preparing and submitting your claim.

Stay Informed

The FCA will continue to provide updates on the compensation scheme. Keep an eye on the FCA website for the latest information and guidance.