Millions owed £700 each in car finance scandal, FCA reveals

Up to 14 million people affected by the UK’s car finance issue may receive around £700 each in compensation.

The payments are expected to be lower than initially predicted. However, the Financial Conduct Authority (FCA), which outlined the compensation plans on Tuesday, stated that lenders could face costs of up to £8.2bn, with the total possibly rising to £9.7bn.

The regulator's long-awaited proposals apply to millions of car finance agreements signed between April 2007 and November 2024. The issue stems from claims that some lenders improperly influenced car dealers through hidden commissions, leading many buyers to unknowingly pay more for their loans.

In a consultation document, the FCA noted that, based on estimated participation, lenders might have to pay £8.2bn, though the figure could reach £9.7bn.

Last August, the FCA suggested most individuals would likely receive less than £950 per agreement. At the time, it indicated the total cost would probably not fall below £9bn and could rise as high as £18bn.

Most new vehicles and a growing number of used cars are acquired through finance deals, usually involving personal contract purchases or hire purchase agreements. Annually, around 650,000 such agreements are made for new cars alone.

If implemented, this would be the largest mass compensation linked to financial products since the issue with payment protection insurance (PPI), which saw 34 million people receiving roughly £1,000 each.