The FCA is taking a proactive step to address long-standing issues in the motor finance market by consulting on a compensation scheme for customers who were overcharged due to undisclosed commission arrangements. This follows a Supreme Court ruling that found some firms were not acting in the best interest of their customers. The move is designed to bring clarity and fairness to the market and could lead to significant payouts for affected consumers.
- 🗣️ The FCA is launching a consultation to establish a redress scheme for customers affected by undisclosed commission payments.
- ⚖️ This action follows a Supreme Court ruling that found some motor finance firms broke the law or failed to comply with regulations.
- 💸 The total cost of the scheme could be substantial, with estimates ranging from £9 billion to £18 billion.
- 🙅 The FCA advises consumers to complain directly to firms and avoid using claims management companies to ensure they receive the full compensation amount.
- 🗓️ The consultation is expected to begin in early October, with potential payments starting in 2026.
Why this matters
This is a major development in consumer redress and signals the FCA’s commitment to holding firms accountable for historical misconduct. The potential scale of the compensation scheme highlights the widespread nature of the issue. For the industry, this could have significant financial implications and will require a comprehensive and well-managed response to handle customer complaints and process compensation claims efficiently.
Things to think about
- Review all motor finance agreements, particularly those from the period in question, to identify any instances of undisclosed commission payments.
- Establish a robust process for handling customer complaints related to this issue, ensuring a fair and timely response.
- Prepare for a potential increase in customer queries and complaints once the details of the compensation scheme are finalized.
- Liaise with legal and compliance teams to understand the full implications of the Supreme Court ruling and the proposed compensation scheme.
- Ensure all communications with customers are clear, fair, and not misleading, and that they comply with new regulatory requirements.
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