Car finance compensation payments delayed as lenders appeal scheme

Millions of drivers who were mis-sold car finance face even longer waits for compensation after lenders launched an appeal against the scheme set up by the financial regulator. The Financial Conduct Authority (FCA) has been ordered by the court to suspend the scheme, meaning payments that were due to start last month are now delayed.

The scheme, unveiled in March, was designed to compensate people who were mis-sold car finance between 2007 and 2024. It is thought to cost lenders around nine billion pounds, covering both compensation payouts and the cost of running the scheme. An estimated 12 million finance agreements are affected, where many customers were not told that dealers were earning commission on the deals. In some cases, people were charged higher interest rates without being informed, a practice banned in 2021.

Compensation payments, averaging around 830 pounds per finance deal, were expected to begin last month. But the FCA announced that the court had ordered a suspension following the lenders' appeal. The case is now not expected to be heard until early next year, meaning any payments due will be delayed.

The FCA says some claimants who do not qualify for compensation should still be told that by lenders, and people should still apply if they think they have a claim. A spokesperson said: "We recognise this is frustrating for consumers. They've been waiting a long time for their address on this issue. We are confident in our scheme. We think it's the fair outcome for consumers and a proportionate response for firms. But it has been challenged and we have to let that process run through. Hopefully we'll get a judgment by the early part of next year. And then if we're successful consumers will receive their money towards the end of next year."

However, some experts say the dragging process will ultimately leave customers worse off. One expert commented: "There's always seem to be the case. The customer is the least important person in the whole process. So you've got banks fighting lawyers fighting courts and the FCA and at the end of it the customers just have to sit and wait and find out who wins to find out if they're going to get any compensation and how much."

The FCA's official advice is for anyone who thinks they might qualify to complain directly to their lender for free, with guidance available on its website. The delay is a frustrating setback for drivers already waiting a long time, and the process is set to last even longer.