A significant shift is occurring in the UK car finance sector, with the Financial Conduct Authority (FCA) considering an industry-wide compensation scheme. This follows revelations about widespread mis-selling practices involving discretionary commission arrangements (DCAs) between 2007 and 2021.
Key Points:
- Discretionary Commission Arrangements (DCAs): These allowed car dealers to set interest rates on finance deals, often leading to higher commissions for themselves without adequately informing customers.
- Legal Rulings: A pivotal Court of Appeal decision in October 2024 deemed these undisclosed commissions unlawful. Subsequently, the FCA announced plans to consult on a redress scheme, with further details expected following a Supreme Court ruling anticipated in April 2025.
- Potential Impact: Analysts estimate that affected customers could receive average payouts of around £1,100, potentially totaling £44 billion across the industry. Major lenders like Lloyds, Santander UK, and Barclays are among those potentially impacted.
- Consumer Action: Over 2.5 million individuals have already lodged complaints using resources provided by consumer advocacy platforms. If the FCA's proposed scheme proceeds, lenders may be required to proactively contact affected customers, eliminating the need for individuals to file separate claims.
