Car finance compensation scheme faces challenge and delay
Summary
A consumer group is challenging a government plan to pay compensation to millions of drivers who were mis-sold car finance deals. The challenge may delay the payments, which were set to start this summer and average £829 per person.Key Facts
- The compensation scheme is run by the Financial Conduct Authority (FCA) and is expected to cost lenders a total of £9.1 billion.
- Millions of drivers were mis-sold motor finance agreements due to hidden and unfair commissions called discretionary commission arrangements (DCAs).
- DCAs were banned by the FCA in 2021 because they encouraged sellers to charge higher interest rates to customers.
- The FCA’s scheme allows drivers to claim compensation without hiring a lawyer or going to court.
- Consumer Voice, a consumer group, says the FCA’s plan leaves many people short-changed and wants the scheme fixed.
- The FCA says its scheme is the fastest and fairest way to pay consumers.
- Legal challenges, including the one from Consumer Voice, may delay the start of compensation payouts.
- Average compensation per person is expected to be around £829.
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