Motorists Could See Billions in Car Loan Payouts Amid FCA Review
So here's something that could shake up the finance world—and possibly your wallet—especially if you’ve ever bought a car on finance before 2021. The Financial Conduct Authority, or FCA, is currently considering launching a major compensation scheme that could cost the car finance industry anywhere between £9 billion and £18 billion. Yes, billion with a “B”.
Now, this whole situation stems from what's being called a car finance mis-selling scandal. For years, dealerships and lenders were using what are known as Discretionary Commission Arrangements, or DCAs. Basically, the more interest they charged you on your car loan, the more commission they made—and they weren’t always upfront about that. That kind of setup created a pretty unfair relationship between the customer and the lender, which the FCA says may have broken its own disclosure rules.
Things escalated when the Supreme Court recently weighed in on a related case. While it ruled that not all hidden commissions were illegal, it did say that certain particularly large and undisclosed commissions could be considered unfair. That part of the ruling has opened the door to a flood of potential claims, especially in cases where the commission was huge—like in the case of Marcus Johnson, who successfully argued that his car loan deal was unfair due to a whopping 55% commission.
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As of now, the FCA says it’s looking into launching a formal redress scheme and will consult on it through the autumn. If it moves forward, payouts could begin as early as next year. But don’t expect a fortune—the average payout is expected to be under £950. Still, it’s something, especially if you were overcharged on interest without knowing.
The FCA is also urging people not to go running to claims management companies. If you think you were affected, you’re better off contacting your car loan provider directly.
It’s worth noting that this scandal has also sparked political drama. Treasury officials and even the Chancellor have been criticized for trying to defend the car finance industry too aggressively, which some MPs say sends the wrong message—that banks can bend the rules and still get protected by the government.
So, while the big lenders may have dodged the worst-case scenario thanks to the Supreme Court’s ruling, they’re not in the clear yet. With the FCA pushing forward, many motorists could still see justice—and a bit of cash—coming their way.
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