MILLIONS of drivers will get £700 in car finance payouts as the financial watchdog unveiled the details of a major redress scheme.
Motor finance companies face a £8.2billion payout after breaking laws by failing to disclose key information, causing customers to overpay or miss better deals.
Today the city watchdog has revealed its plan for a car finance compensation scheme[/caption]
Payouts for motorists will begin next year.
In August, the FCA announced plans for a redress scheme.
This came after the Supreme Court overturned a ruling that accused companies of failing to disclose “hidden” commission payments to borrowers.
The Supreme Court sided with lenders and this meant they avoided paying out to millions of drivers over hidden commission payments.
But the FCA decided that millions of drivers could still be owed compensation because of contracts that had “discretionary commissions arrangements” (DCAs).
A DCA is where a broker and dealer could increase interest rates for drivers and the broker and dealer could earn higher commission by doing so.
Many banks have already set aside funds for claims.
In September, BMW’s UK car finance business said it has allotted £209million.
While Close Brothers said it’s set aside £165million.
Lloyds Bank allocated £1.15 billion, Santander £290million, and Barclays £95million.
Who will get compensation?
Drivers who took out personal contract purchase (PCP) or hire purchase agreements before between April 6 2007 and November 1 2024 where commotion was payable by the lender to the broker.
Anyone who wasn’t told about key details such as commission payments should complain now.
The FCA said that drivers do not need to use a claims management firm or law firm to make a claim. They have a template letter on their website for motorists to use.
Lenders will look at claims where drivers have already complained once the scheme is launched.
The FCA said you could speed up getting your compensation by logging a claim now.
But lenders will contact drivers who haven’t complained within six months of the scheme starting.
