New update on £829 payment for millions of drivers who bought car finance between 2007 and 2024
Millions of motorists are in line for an average payout of £829 due to car finance compensation but they'll have to wait for challenges against it to be heard, which will come in February.
The compensation scheme is worth £9.1 billion and there are thought to be around 12.1 million car finance agreements affected, but any possible payout will be beyond the legal challenge period set for between 16 and 26 February.
The Financial Conduct Authority (FCA) plans to compensate drivers who were mis-sold car finance between 2007 and 2024, but the scheme is on hold while Volkswagen Financial Services, Mercedes Benz Financial Services, and Credit Agricole Auto Finance challenge it.
According to the FCA lenders have to keep preparing to pay compensation out and keep progressing people's complaints, but they also warned 'there may be no motor finance compensation scheme and no complaint handling pause'.
Advert
That's in the event that the compensation scheme is quashed in court.
As for what this is all about, the FCA has accused car finance firms of having 'broken the law by failing to disclose important information to customers'.
When people bought cars on finance there was often something called a Discretionary Commission Arrangement (DCA) which meant that dealerships got a commission from the lender based on the interest rate charged.
Costs were passed onto the customer which meant that in millions of cases the interest on their car finance was increased to pay the dealer or get a higher commission.
It means that in around 12.1 million car finance deals in the UK someone was paying more than they should and they often weren't told about a DCA being part of their car finance costs.
Because of exclusive agreements between dealerships and lenders it means customers may not have been given accurate information about the best deal available.
Regulators had been hoping that this would get handled in December but with the delay it's going to be the new year at the earliest when people can expect to get any compensation.
Remember that the £829 payout is an average, the amount people will get depends on the cars they bought and how much they were paying for them.
If you wanted to know whether you were eligible, if you bought a motor vehicle on finance between 6 April 2007 and 1 November 2024 with a Personal Contract Purchases (PCP) & Hire Purchase (HP) then you might be eligible.
In which case your first port of call ought to be your lender to make a complaint, after which you should hear within three months whether or not you're eligible for compensation.
After that you have a month to accept the compensation amount or challenge it.
Joe Harker