Millions of Motorists Set for Automatic Compensation in Car Finance Misselling Scandal

British motorists are poised to receive automatic compensation payments following the Financial Conduct Authority’s (FCA) announcement of a comprehensive redress scheme addressing the motor finance mis-selling scandal.

The regulatory body is orchestrating an industry-wide compensation initiative that will require banks to proactively identify and reimburse affected customers. The scheme’s distinctive feature lies in its automatic nature, effectively bypassing the need for individual claims submission through management companies.

The FCA’s investigation has centred on the controversial practice of banks offering undisclosed commissions to car dealers for arranging loans. The regulator’s primary focus remains on discretionary commission arrangements, where dealers received additional incentives for selling higher interest rate loans to unsuspecting customers.

Major financial institutions have already begun preparing for substantial payouts. Lloyds Banking Group has set aside more than £1 billion in provisions, whilst Close Brothers has earmarked £165 million to address potential compensation claims.

The timing of the final scheme implementation hangs in the balance, with a crucial Supreme Court ruling expected next month. The judicial decision will determine the broader scope of mis-sold car loans, though the FCA maintains its focus on specific commission-based arrangements.

Industry expert Molly Preleski from PA Consulting emphasises the scheme’s efficiency: “The industry-wide redress programme will ensure genuine cases receive compensation without bureaucratic hurdles, whilst effectively filtering out speculative claims from both individuals and claims management companies.”