Millions of motorists may experience delays in receiving compensation for car finance following a legal challenge, as warned by authorities. The compensation, which is expected to cover approximately 12.1 million unfair motor finance agreements, averages around £829 per deal. Consumer Voice has raised concerns about the fairness of the Financial Conduct Authority’s compensation scheme and is seeking a legal review to ensure that consumers are not left financially disadvantaged.
Initially estimated at £8.2 billion, the compensation payouts by firms are now projected to be around £7.5 billion, with total costs, including administration, expected to reach £9.1 billion. Consumer Voice plans to challenge the current scheme, arguing for a more comprehensive and just assessment of the harm suffered by drivers, including properly calculated compensatory interest.
The group asserts that the current redress scheme, based on the Supreme Court’s ruling in Johnson v FirstRand, excludes a significant number of consumer complaints from receiving full commission redress. Alex Neill, co-founder of Consumer Voice, emphasized the need for a fair and lawful compensation system that holds lenders accountable for their actions. The group’s aim is to ensure that millions of affected individuals receive the appropriate compensation they deserve.
Despite the FCA’s assertion that their scheme provides the fastest and fairest method of compensating consumers, Consumer Voice believes that delays in payouts are unnecessary. James Daley, managing director of Fairer Finance, expressed concerns that challenging the FCA’s scheme could prolong the process and impact millions of individuals awaiting compensation.
The compensation scheme applies to car finance agreements made between April 6, 2007, and November 1, 2024, where the lender paid commission to the broker. Consumers who had agreements with discretionary commission arrangements, high rates or commission, or undisclosed contractual ties may have been mis-sold. While the average compensation per agreement was initially estimated at £700, individual circumstances may lead to higher or lower payouts.
Following a tightening of eligibility criteria by the FCA, fewer drivers are expected to qualify for compensation, but those who do will receive higher payouts. This adjustment aims to ensure that compensation is distributed more equitably among affected individuals.
