Up to 30 million car finance deals made between 2007 and 2020 could be eligible for compensation, the boss of the UK’s financial watchdog has said. Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), said he hopes that most payouts to drivers will be made during 2026.
The FCA is currently consulting on an industry-wide redress scheme for consumers who experienced harm. It said some motor finance firms broke the law or its rules by not properly informing customers about commission paid by lenders to the car dealers that sold them the loan.
Mr Rathi told a group of MPs on the Treasury Committee: “During the period that we’re looking at – from 2007 through to approximately 2020 – there are around 30 million agreements… and all of those will be eligible for compensation. One of the things that we are looking at very closely is what the scope of the scheme will be.”
He said that the FCA was looking into so-called discretionary commission arrangements (DCAs), of which there were about 14.6 million over the same period. This refers to arrangements whereby brokers, including car dealers, were able to increase interest rates on car loans so they could get more commission.
“A very significant proportion of those agreements… we do think probably breached the law when it came to disclosure and, by extension, unfair relationships,” Mr Rathi said. The regulatory chief said it was consulting on the scheme because there was “evidence that there have been unfair relationships between lenders and their consumers and commissions paid that were not adequately disclosed”.
He said that a “large number of consumers were not properly informed and perhaps did not get the fairest interest rate that they should have done” for a motor finance agreement. The consultation is due to be launched by early October, Mr Rathi said, adding: “We hope that compensation, where it is due, can start to be paid next year.”
“The practices that we’re dealing with in this scheme are practices of the past, and we do want to put this behind us as soon as possible,” he stressed.
