The victims of the erroneous sales of automotive financing will probably receive less than £ 950 per transaction as part of a compensation plan proposed by the financial regulator, with the first payments expected next year.
Friday, the Supreme Court ruled that the hidden commissions of lenders to concessionaires on car loans were not illegal, which means that millions of motorists will not be able to claim.
However, the judgment left open the possibility of compensation complaints for particularly important commissions which, according to the Supreme Court, were unfair.
Following the decision, the Financial Conduct Authority (FCA) said that it would consult on the management of a payment scheme – estimated between 9 billion pounds sterling and 18 billion pounds sterling.
The FCA said it was “difficult to estimate at this stage the total cost for the program industry”, but it is understood that millions could be eligible.
The industry should cover the total costs of any potential remuneration regime, including administrative costs.
Those who have already complained have nothing to do, said the regulator, advising those who have not yet complained of contacting their car loan supplier rather than using a complaint management company.
He added that he “anticipates[s] Require that companies are as far as possible to raise awareness of customers, they can be eligible and what they may need to do “and that” should cover the agreements dating from 2007 “.
However, Finance & Leasing Association said it was concerned “to know if it is possible to have a fair repair program which dates back to 2007 when companies were not required to have such dated information”.
The FCA said that she will start her consultation on which should be eligible for compensation and how much he should obtain in October, adding that the decision of the Supreme Court provided “clarity”.
Friday, the Supreme Court canceled the previous court decisions which indicated that the hidden commissions on car loans were illegal.
The case was filed by two specialized lenders, close brothers and South Africa first and first, in order to challenge the three consumers who collectively won a case of the court of appeal in October.
However, the Supreme Court judged that if the commission was extremely high, as in the case carried by Marcus Johnson, where the commission paid to the concessionaire was 55% of the burden or total credit, including interest and costs – whether it was a “powerful indication”, the relationship between Mr. Johnson and the lender Firetrand was unfair.
The Supreme Court granted Mr. Johnson the amount of a commission more interest.
The FCA said that Friday’s judgment “helps us because we have examined what is unfair and, before this judgment, there were different interpretations of the law from various courts”.
Nikhil Rathi, CEO of the FCA, said: “It is clear that some companies have violated the law and our rules. It is just that their customers are remunerated.”
He said that consumers did not need to use a complaint management company or a law firm to make a complaint, adding: “If you do, it will cost you an important part of all the money you get.”
The question of the erroneous car financing sale dates back to 2021, when the FCA prohibited transactions in which the concessionaire received a lender committee according to the interest rate billed to the customer.
These were known as the discretionary commission (DCAS).
The FCA said that the DCAS welcomed a buyer to be billed a higher interest rate than necessary, which lets them pay too much.
Since January, he has examined if compensation must be paid to people with these transactions before 2021.
Some 80,000 cases open to this issue were actually waiting until the decision of the Supreme Court on Friday.
Following the decision, the FCA said that the remuneration regime should cover the DCAs “if they were not properly disclosed” but also cases like that of Mr. Johnson, in which there was no DCA but the commission was too high.
He added that the amount of money that the victims depend on will depend on the “degree of damage suffered by the consumer and the need to ensure that consumers continue to be able to access affordable loans for motor vehicles”.
The vast majority of new cars, and many seconds, are purchased with financing agreements, the FCA claiming that it analyzes the potential market impact of any repair program.
In February, the attempt by Chancellor Rachel Reeves to intervene in the Supreme Court case concerning concerns about the potential impact of market decisions was blocked.
The FCA said on Sunday that it expects “a healthy financial market for new cars and used to continue despite any repair program that we offer”.
