Motorists will be eligible for compensation from mis-sold motor finance policies, though they are likely to receive less than previously estimated.
The Financial Conduct Authority (FCA) said 14 million motor finance agreements – about 44% of the total – between April 2007 and November 2024 could result in payouts.
An initial estimate of £950 per deal is now likely to average about £700, leaving lenders with £8.2bn bill, less than they had initially set aside. The industry-wide scheme needed to run the scheme will cost lenders a further £2.8bn.
The Finance & Leasing Association, which represents motor finance providers, said that “we remain concerned that the costs are too high”.
The ruling follows inaccurate information given to car buyers about commission.
Nikhil Rathi, chief executive of the FCA, said: “We recognise that there will be a wide range of views on the scheme, its scope, timeframe and how compensation is calculated.
“On such a complex issue, not everyone will get everything they would like.
“We want this dealt with quickly. People weren’t told important details about their motor finance deals. That’s because firms broke the law and our rules.”
Danni Hewson, AJ Bell head of financial analysis, said: “Lenders had already breathed a sigh of relief about the scale of the compensation they would have to dish up to motorists and today’s update from the FCA brings the bar even lower.
“But 14 million car buyers do stand to receive a significant amount of compensation.
“For those who have previously taken out loans it will require a shuffle through old paperwork to put in a complaint to lenders or brokers, while those who have already complained won’t need to do so.
“This decision brings to an end a rather ugly chapter in car finance lending and consumers are warned that they could lose significant portions of any compensation due if they use third parties to make a claim.”
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