Car Finance Compensation Payments Delayed Until Next Year

Millions of drivers who were mis-sold car finance agreements must wait until at least 2027 to receive compensation, regulators have announced.

Average payments of about £829 are expected under the rules published by the Financial Conduct Authority (FCA).

The decision applies to about 12 million car loans - just over 40% of the total number during the period.

Under the latest proposals, the FCA expects average payouts of £829 per mis-sold agreement.

The total cost of the compensation, including administrative costs, could hit £9. 1bn.

Complaints have already been made about four million finance agreements. Those people do not need to do anything.

The regulator urged anyone who has not yet complained to contact their car loan provider directly, rather than using a third-party claims management company.

Motorists have also been warned to be on the alert for scammers posing as car finance lenders offering fake compensation.

The FCA has published this guidance on how to complain, external.

Lenders will respond to claims, explaining if you are owed compensation and how much - but timing of those letters is now uncertain owing to the legal challenge.

Those who complain before the scheme gets up and running are likely to receive compensation faster

People who complained by 30 June and are not owed compensation should be told by 18 November, those who complained by 31 August will be told if they are not owed compensation by 18 January 2027

Those who have not complained will be contacted by their lender. People will be asked if they want to opt in to the scheme to have their case reviewed

Those motor finance borrowers who do not receive a letter - for example because lenders no longer have their details and cannot trace them - can still make a claim.

Regulators have warned claims management companies and law firms involved in motor finance commission claims to make sure consumers do not have multiple representatives for the same claim and are not charged excessive termination fees.

FCA boss Nikhil Rathi told the BBC's Today programme there are