Drivers in UK to get average payment of £700 from next year | UK | News

Millions of motorists are set to receive an average of £700 in car finance payments, the UK Financial Watchdog announced on Tuesday in a proposed scheme. Compensation payments in nearly 14 million unfair motor finance settlements could start next year. The Financial Conduct Authority (FCA) has estimated that the remediation plan could cost lenders £8.2bn in compensation.

This is lower than the £9 billion to £18 billion it had previously forecast. The regulator said the payments would affect millions of deals made between April 6, 2007 and November 1, 2024. Motor finance firms broke the law or its rules by not properly informing customers about the commission paid to auto dealers who sold loans to lenders.

Nikhil Rathi, chief executive of the FCA, said: “Many motor finance lenders have failed to comply with the law or rules. Now we have legal clarity, it is time for their customers to get fair compensation. Our scheme aims to be simple for people to use and for lenders to use.”

“We know there will be a wide range of views about the scheme, its scope, the timeframe and how compensation is calculated. “With such a complex issue, not everyone will get everything they want.

“But we want to work together on the best possible plan and draw a line on this quickly. This certainty is vital so a reliable motor finance market can continue to serve millions of families every year.”

Lenders have until November 18 to respond. After that date, the FCA is expected to publish final rules by early 2026, then launch the scheme and start payment late next year.

This comes after the Supreme Court sided with finance companies in two of three key test cases focusing on commission payments made by banks and other lenders to car dealers.

This meant that millions of drivers were unable to claim compensation for hidden commissions paid on car loans.