The financial watchdog has revealed details of its car finance compensation scheme that could see billions of pounds paid back to millions of motorists.
The Financial Conduct Authority said banks could be forced to pay back £8.2billion to consumers, with motorists ‘being compensated an average of around £700 per agreement’.
It said that it expected around 84 per cent of eligible consumers would take part in the scheme, but that ‘in the very unlikely event of 100 per cent take-up, firms would owe up to £9.7bn in redress’.
The scandal, which has been dubbed ‘PPI on Wheels’, is focussed on ‘secret’ commissions paid by lenders to car dealers as part of a personal contract purchase (PCP) and hire purchase (HP) agreements between 2007 and 2021.
In August, five judges at the Supreme Court dealt a blow to millions of drivers hoping for payouts, when they ruled that no being aware of commission was not enough to count as mis-selling.
But it added that car owners could still claim if they met certain conditions.
The FCA said that it would look into launching a redress scheme and today revealed details of this.
It said: ‘The majority of motor finance agreements will not qualify for compensation. We estimate 14.2m agreements – 44 per cent of all agreements made since 2007 – will be considered unfair.’
To qualify, the FCA said agreements would ‘involve inadequate disclosure’ of one or more of the following:
- a discretionary commission arrangement
- high commission (where the commission is equal to or greater than 35% of the total cost of credit and 10% of the loan)
- contractual ties that gave a lender exclusivity or a right of first refusal.
More to follow
