The FCA is going ahead with a scheme to compensate motor finance customers who were treated unfairly.
It said Courts have found that firms broke the law by failing to disclose important information to customers and an industry-wide scheme is the quickest and most cost effective way to deliver fair compensation.
The FCA had over 1,000 consultation responses and had made changes, including the tightening of eligibility so only those treated unfairly receive compensation.
These and other changes mean 12.1m agreements are now eligible for compensation, down from 14.2m at consultation.
It has also adjusted how compensation is calculated to better reflect greater loss between 2007-2014.
Firms are expected to pay out around £7.5bn in redress, down from £8.2 billion at consultation.
It has also streamlined the scheme so consumers are compensated quickly and it is cost effective for firms to deliver.
It said millions of consumers will be compensated this year, most of the rest by the end of 2027.
Lenders will only need to contact complainants or those due compensation and recorded delivery will not be required, helping to cut the cost to firms of delivering the scheme by over 40%.The estimated total bill to firms is down from £11 billion to £9.1 billion.
Motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker will be considered for compensation.
Firms owe liabilities from 2007 which is a big sticking point. How will firms get the data?The FCA said if complaints from that date were not covered they would need to be dealt with individually by firms, the Financial Ombudsman Service and through the courts, resulting in higher costs, lengthy delays and greater uncertainty.
“We have the powers to include agreements before 2014. However, this was questioned by some consultation respondents.
“So, we will implement two schemes, one covering 6 April 2007 – 31 March 2014 and one from 1 April 2014 – 1 November 2024.
“If the earlier period is subject to legal challenge on these grounds, redress for consumers with agreements from April 2014 shouldn’t be delayed.
