Millions of car finance customers in the UK may be eligible for compensation as part of a £7.5 billion redress scheme, regulators announced. The Financial Conduct Authority (FCA) established the scheme to address widespread issues concerning the sale of car finance products between April 2008 and January 2020. The core issue revolves around lenders failing to adequately disclose commission payments they received from car dealerships, which were often linked to the interest rate customers paid on their car finance agreements.

The FCA determined that this practice could have led to customers paying more than they should have for their car loans. The £7.5 billion figure represents the estimated total cost of redress that lenders are expected to pay out, including compensation for customers who were potentially mis-sold car finance and interest refunds where appropriate. Lenders are now required to review past car finance agreements and identify customers who may be entitled to compensation. The FCA has outlined a straightforward process for customers to claim, which involves contacting their car finance provider and gathering relevant documentation.

The FCA has set a deadline for lenders to complete these assessments, which is expected to be in 2024. Customers do not need to take any immediate action, but are encouraged to gather any relevant documentation related to their car finance agreement, such as loan contracts and statements. The FCA has also published detailed guidance for consumers on its website, explaining the scheme and the claims process. The redress scheme aims to provide fair compensation to those who were financially impacted by the historical practices of car finance lenders.