Drivers have been warned to watch out for scammers that are seeking to take advantage of the recent landmark ruling on mass instances of car finance mis-selling in the UK.
The Financial Conduct Authority (FCA) has told motorists that it will be consulting on a compensation scheme for those who have been affected by the issue, which it says could cost finance lenders up to £18 billion.
A Supreme Court ruling earlier in the month found that lenders are not liable for hidden commission payments in car finance schemes. The decision means that many contested claims will not go ahead, but the most serious claims will be eligible for compensation.
Many cases in a separate strand of the car finance mis-selling case, which was not part of the Supreme Court ruling, are also set to receive payouts.
More details of the FCA-led compensation scheme should arrive in the coming months, with the watchdog confirming that any payments will begin in 2026.
A new warning from authority says that anyone who believes they are affected should not share their details with anyone pretending to be linked to a compensation scheme or car finance lender.
The FCA says it put out its warning following “reports of scammers contacting people.”
It added: “These fraudsters are asking individuals for personal information including their name, address, date of birth and bank details. They then falsely claim that these people are owed compensation.”
The only action those who have been affected have been advised to take is to complain directly to their provider now. The FCA has shared more information on how to do this.
Am I eligible for the car finance compensation scheme?
The proposed scheme firstly targets issues arising from Discretionary Commission Arrangements (DCAs), which were outlawed in January 2021 and not involved in the recent Supreme Court case.
Individuals who entered into personal contract purchase (PCP) or Hire Purchase (HP) deals before the ban are likely to have been unknowingly subjected to DCAs.
However, those with 0 per cent interest rates or very small commissions are unlikely to qualify for compensation under this strand.
The newer element of the mis-selling case, relating to the Supreme Court ruling, stems from commissions which the FCA explains were “unfair and therefore unlawful.” Unlike the DCA cases, these require individual assessment, making them harder to define.
Factors in the payout may even include how vulnerable a person is, and therefore whether it can be considered more unfair for the commission to have been so high.
The FCA estimates that most individuals making claims through the scheme will receive “less than £950 in compensation per agreement”.
The final cost to the industry will ultimately depend on the final details of the scheme.
