Drivers affected by the car finance scandal may receive compensation of around £700 sooner than expected, following a revised deadline set by the Financial Conduct Authority (FCA). The regulator has instructed motor finance firms to begin processing complaints two months earlier than originally planned, speeding up the compensation process for those mis-sold car loans.
Previously, the FCA had paused the handling of certain motor finance complaints, with a planned resumption date of July 31, 2024. Now, the pause will be lifted on May 31, allowing firms to respond to complaints starting earlier. While firms were expected to investigate complaints throughout the pause, they were not required to formally respond until the deadline passes.
In a December update, the FCA confirmed it intends to implement a compensation scheme for customers who took out car finance agreements between 2007 and 2024 without being properly informed about broker commissions. These commissions, often paid to car dealers or brokers, were not always transparently disclosed, leading to thousands of unfairly sold loans.
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The proposed scheme could cover approximately 14 million deals, with impacted motorists potentially receiving payouts averaging £700. Despite considerable opposition from lenders, the FCA is moving forward with plans to launch the scheme early next year.
By advancing the complaint handling deadline, the FCA aims to give firms adequate time to prepare and respond to complaints promptly. While most cases are expected to fall within the redress scheme, firms must also be ready to address complaints outside its scope.
This move marks a significant step towards resolving the car finance scandal and delivering compensation to affected drivers more swiftly.