The FCA has launched a public information campaign as it prepares for a redress scheme expected to cover millions of car finance agreements. The regulator says many customers may be entitled to compensation but are uncertain about how to begin the process.
FCA Warns Drivers over Compensation Deductions
The FCA has confirmed that 12.1 million motor finance agreements are eligible for compensation under the proposed redress scheme, with a total estimated cost of £9.1 billion. This represents an average redress payment of £829 per agreement, according to the Financial Conduct Authority.
The regulator has warned that motorists who use claims management companies (CMCs) or law firms to pursue compensation may lose more than 30 per cent of the money they receive through fees.
A survey carried out by the FCA found that 27 per cent of car finance customers were not confident about making a complaint without support from a CMC or legal firm. The research also showed that almost three in five motorists had already made, or were considering making, a claim, while 23 per cent said they were unsure about the options available to them.
The FCA has introduced free resources, including a template complaint letter on its website, to help drivers raise concerns about the disclosure of motor finance arrangements without paying a third party. “Many people who may be owed compensation aren’t sure where to start or don’t realise they don’t have to pay someone to make a complaint,” Sheree Howard, executive director at the FCA, said.
Legal Challenges Could Affect Timing of Payments
The FCA’s advertising campaign began on 27 July and will run until 6 September across television, radio, print, billboards and social media. The regulator said the campaign aims to help customers feel more confident about making complaints directly.
The compensation scheme was announced in March, with the FCA initially estimating that most claims would be settled by January 2028. The timetable has since been affected by legal action brought against aspects of the scheme.
According to the FCA, the motor finance redress scheme has been partially suspended while the Upper Tribunal considers legal challenges. The cases involve Consumer Voice, Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance.
Companies involved in the scheme will not be required to calculate or pay compensation, or send communications about potential payments, until the tribunal process has ended.
If the scheme is upheld and there is no appeal, the FCA expects payments to begin in 2027. If the tribunal overturns the scheme in full or in part, the regulator will need to decide the next steps. The FCA has warned that changes to the scheme or further legal challenges could push compensation payments back until 2028 or beyond. According to the regulator, the final timing will depend on the outcome of the legal process and any decisions that follow.
