TL;DR
An FCA review of motor finance commission arrangements has set out a redress regime that could pay around £830 each to drivers affected by undisclosed commission. Specific thresholds and eligibility rules apply, and the regime is at consultation stage.
An FCA review of motor finance commission arrangements has set out a redress regime that could pay around £830 each to drivers affected by undisclosed commission on car finance agreements signed between specified dates. The regime is at consultation stage and includes specific thresholds for eligibility, including monthly payment levels and lender categories.
What the FCA review covers
The Financial Conduct Authority has been reviewing motor finance commission arrangements, particularly discretionary commission arrangements that allowed dealers to influence the interest rate charged on a car loan. The arrangements were banned from January 2021.
The review followed Supreme Court and Court of Appeal rulings on whether undisclosed dealer commission constituted a breach of the lender's duty to the consumer. The proposed redress regime applies to specified agreement types and date ranges.
Who qualifies for the £830
The figure of around £830 is an average estimate per claimant under the proposed redress scheme. Actual payments vary depending on the original loan amount, the interest rate applied and the duration of the agreement.
Some drivers may receive less, particularly where the original monthly payment was below specific thresholds. The £120 monthly figure has been raised in commentary as a possible cut-off but is not formally confirmed.
How to check if your loan is in scope
Drivers should check the date of the car finance agreement, the lender and whether it was a discretionary commission arrangement. Agreements signed between 2007 and January 2021 with a discretionary commission feature are within the scope of the review.
The lender's customer service team can confirm the type of agreement. Letters from the lender about the FCA review will indicate scope and any compensation that has been provisionally calculated.
How to make a claim
Drivers can complain directly to their lender. The lender has eight weeks to provide a final response. If the complaint is rejected or no response is received, drivers can escalate to the Financial Ombudsman Service.
Claims management companies offer to handle complaints for a fee. The FCA reminds drivers that complaints can be made directly to the lender free of charge and that the FOS process is also free.
Timetable and next steps
The FCA consultation on the proposed redress regime closes on a specified date, with the final policy statement expected shortly afterwards. Implementation may take months once the policy is confirmed.
Drivers do not need to take any action until the redress regime is finalised, but should keep documents related to the original car finance agreement. Citizens Advice and MoneyHelper publish free guidance on the wider claims landscape.
Key facts
- FCA redress regime is at consultation stage.
- Estimated average payment is around £830.
- Discretionary commission arrangements banned from January 2021.
- Complaints can be made directly to lenders for free.
- Financial Ombudsman Service handles disputes.
FAQ
Who qualifies for the £830 car finance compensation?
Drivers who held a car finance agreement with a discretionary commission arrangement signed between 2007 and January 2021. The £830 figure is an estimate; actual payments vary.
How do I check if my loan is affected?
Check the date of the agreement and the lender. Lenders are writing to customers to confirm scope. The lender's customer service team can confirm the type of agreement and any provisional calculation.
Do I need to use a claims management company?
No. Complaints can be made directly to the lender for free. The FCA reminds drivers that the Financial Ombudsman Service complaint process is also free of charge.
When will I get paid?
The FCA redress regime is still at consultation stage. Implementation may take months once the policy is confirmed. Drivers should keep documents related to the original car finance agreement.
