FCA's Car Loan Compensation Scheme Could Cost Up to £18bn
The FCA plans a multibillion-pound compensation scheme after the Supreme Court ruling on hidden car loan commissions, with most drivers set to receive under £950.
Consultation on compensation scheme
The Financial Conduct Authority (FCA) has said a compensation scheme for motorists affected by hidden commissions on car loans could cost between £9bn and £18bn. It will consult on the details following the Supreme Court’s recent judgment. If approved, the first payouts, averaging less than £950 per driver, could begin next year.
Supreme Court ruling limits eligibility
On Friday, the Supreme Court overturned earlier rulings that had deemed hidden commissions unlawful. It found that standard commissions did not breach consumer law, meaning most motorists cannot claim. However, it ruled in favour of a claim where the commission was so large—55% of the total cost—that it was deemed unfair. That case involves Marcus Johnson against lender FirstRand, with the court awarding him the full commission plus interest.
Next steps for motorists
The FCA advises those who have already lodged complaints need take no further action. Drivers who have yet to complain should contact their car finance provider directly rather than use claims management companies. The regulator will set eligibility criteria in its formal consultation, expected to launch shortly.
While the Supreme Court cleared most hidden commissions, it opened the door for claims where the commission was so high it rendered the deal unfair, prompting the FCA to propose a multibillion-pound compensation scheme.
This topic was reported by BBC News
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