Britons who have purchased car finance may be eligible for compensation averaging around £1,400 per customer, as a payout scheme of up to £8.2 billion inches closer to realization. The Financial Conduct Authority (FCA) has proposed a compensation plan that could see car buyers receiving substantial payouts due to undisclosed commissions between 2007 and 2024. The estimated total includes £8.2 billion earmarked for compensations.

Several financial institutions, including Close Brothers and Santander, are bracing for significant payouts, with reserves set aside for potential compensation costs. Lloyds, through its Black Horse brand, has allocated £1.95 billion, while automakers like Mercedes-Benz and BMW have also earmarked over £500 million each.

The scandal surrounding car finance surfaced when it was discovered that some lenders had been providing undisclosed commissions to dealerships, allowing them to manipulate interest rates on finance agreements. The lack of transparency led to inflated interest charges for many consumers.

The FCA’s investigation revealed that a substantial number of car finance agreements sold during the mentioned period lacked sufficient disclosure, potentially affecting 44% of consumers. The regulator stated that this lack of transparency denied consumers the opportunity to negotiate better deals and may have resulted in higher loan costs.

With a revised judgment by the Supreme Court reducing lender liabilities, the FCA is now set to finalize the rules for a redress scheme. Under this proposed scheme, lenders may have to disburse up to £8.2 billion, with potential costs estimated as high as £11 billion. Affected customers could receive an average compensation of around £700 per claim, with Locksley Law reporting an average of 2.6 claims per customer, potentially resulting in payouts exceeding £1,400.

Consumers who suspect they were mis-sold car finance agreements during the specified period may be eligible to claim compensation. The FCA is planning to launch a free redress scheme in 2026, although participation is not mandatory. Alternatively, affected individuals can pursue legal action independently.

For those considering claims under the FCA scheme, the regulator offers a template letter on its website for affected consumers, providing guidance on the process. Eligible customers will be contacted by lenders once the scheme is operational.