Up to 14m car loan scandal victims in line for average £700 payout, FCA says

https://www.theguardian.com/business/2025/oct/07/uk-car-loan-scandal-victims-in-line-for-payout-fca

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City regulator unveils compensation scheme for motorists who bought cars via discretionary commission deals from 2007 to 2024

Up to 14 million victims of the UK’s car finance scandal look likely to receive compensation payouts averaging £700.

The payouts would be less than previously expected, but announcing the plans for compensation on Tuesday, the Financial Conduct Authority (FCA) said that lenders could be landed with an £8.2bn compensation bill, though it could go as high as £9.7bn.

The City regulator’s long-awaited proposals for a compensation scheme cover millions of motor finance agreements taken out between April 2007 and November 2024.

This relates to the alleged large-scale mis-selling of car loans involved in the payment of “secret” commissions to car dealers, and millions of car buyers unknowingly paying more for their finance than they should have.

Launching a consultation, the FCA said that based on the number of consumers it estimated could take part in the scheme, lenders could be landed with an £8.2bn compensation bill, although it could go as high as £9.7bn.

The FCA said in August that it estimated “most individuals will probably receive less than £950 in compensation per agreement”. At that time it said it was unlikely the cost of the scheme would be much lower than £9bn, and could be up to £18bn.

The vast majority of new cars and an increasing number of used vehicles are bought with motor finance – typically either a personal contract purchase plan or a hire purchase agreement. In a typical year there are about 650,000 motor finance agreements in the new car market.

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This looks likely to be the biggest mass payout relating to a financial product since the payment protection insurance (PPI) mis-selling debacle, which led to 34 million consumers receiving an average of about £1,000 each.