Motor Finance Mis-selling: Millions Face Delay as Payouts Pushed to Next Year

2025-08-03
Motor Finance Mis-selling: Millions Face Delay as Payouts Pushed to Next Year
Daily Mail

Millions of UK motorists are facing a longer wait than anticipated for compensation related to motor finance mis-selling. Following a recent Supreme Court ruling, the Financial Conduct Authority (FCA) has announced a delay in the payout process, with payments now expected to begin in 2025.

The Supreme Court's judgement, delivered last Friday, introduced significant complexities regarding the legal basis for claims. The FCA acknowledges this and has stated that it will be consulting with stakeholders throughout October to determine the best approach for calculating and distributing redress.

What Happened? The Supreme Court Ruling Explained

The core of the issue revolves around the type of interest rate that should be considered when assessing mis-selling. The Supreme Court ruled against the FCA’s initial interpretation, finding that claims should primarily focus on sales where the commission-based model incentivised lenders to prioritise volume over affordability checks. This nuanced decision means a more detailed examination of individual loan agreements will be required.

Who is Affected and How Much Could They Receive?

An estimated 3.6 million people are potentially eligible for compensation. The amount of redress varies considerably depending on the specifics of each case, but some claimants could be entitled to thousands of pounds. The FCA estimates the total cost of compensation could reach up to £3.9 billion.

What's the FCA Doing Now?

The FCA is now embarking on a consultation process to refine its approach to calculating redress. Key areas of focus include:

  • Determining the appropriate methodology for calculating redress: This will involve considering the Supreme Court's judgement and assessing the impact of commission on lenders’ decisions.
  • Developing a streamlined process for claims: The FCA aims to create a system that is fair to both consumers and lenders, while also being efficient and manageable.
  • Ensuring the financial stability of lenders: The FCA needs to balance the need to provide redress with the need to protect the financial health of motor finance companies.

Timeline and What Motorists Should Do

The FCA has outlined the following tentative timeline:

  • October 2024: Consultation with stakeholders begins.
  • Early 2025: Final methodology for redress calculation is announced.
  • Mid-2025 onwards: Redress payments are expected to commence.

Motorists who believe they may have been mis-sold motor finance are advised to:

  • Gather relevant documents: This includes loan agreements, sales brochures, and any correspondence with the lender.
  • Be patient: The process is complex and will take time.
  • Stay informed: Keep an eye on the FCA’s website for updates and guidance.

While the delay is disappointing for many, the FCA’s commitment to ensuring a fair and accurate redress process is crucial. Motorists should remain vigilant and prepared to submit their claims when the process officially opens.

Disclaimer: This article provides general information only and does not constitute legal advice. Individuals seeking specific advice should consult with a qualified legal professional.

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