Drivers may get compensation offers before car finance saga ends
The regulator says it supports lenders offering early compensation offers, as long as they are fair.
Drivers may be offered compensation from lenders before the next legal stage in the car finance mis-selling saga is resolved.
The Financial Conduct Authority (FCA) said it would welcome lenders making settlement offers, provided customers are not left worse off than under its proposed central scheme.
That scheme is now facing a legal challenge, due to be heard in February, and any compensation resulting from it is unlikely to be paid until late next year.
Barclays has already confirmed it will begin making early compensation offers from now, and others are expected to do the same.
The FCA said it still expects only a minority of claimants to receive early offers, with most people having to wait for the outcome of next year’s court case.
Stephen Braviner Roman, the FCA’s general counsel and co-lead on the motor finance project, said: "Fair settlement offers could result in some people getting money sooner. It's clear they want the choice.
"Anyone who wants to wait can, and there's no obligation to agree to the offer. We'll closely monitor firms making offers and expect them to be clear what accepting an offer means."
Most new cars, and many used ones, are bought using finance agreements. Buyers pay an upfront deposit to secure the vehicle, then make monthly payments with interest.
However, millions of drivers who took out a car loan between April 2007 and November 2024 will be eligible for compensation after the loans were mis-sold.
The issue mainly involved car dealers receiving commission from lenders based on the interest rate charged to the customer. These were called discretionary commission arrangements (DCAs), and customers were often not told about them.
Average compensation payments of about £829 are expected across about 12 million car loans, or around 37% of the total number during the period.