Car finance lenders told to brace for redress scheme
By Abigail Townsend
Date: Tuesday 11 Mar 2025
(Sharecast News) - The financial regulator is considering introducing an industry-wide redress scheme for customers left out of pocket by historic car finance mis-selling, it confirmed on Tuesday
Under any redress scheme, banks would be required to contact customers who had lost out and offer them appropriate compensation.
The FCA, which first started investigating the car finance market in early 2024, said a scheme would be simpler than customers bringing their own complaints.
It continued: "We would expect fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive.
"It would also be more orderly and efficient for firms than a complaints-led approach, contributing to a well-functioning market in the future."
The watchdog added that it wanted to ensure consumers were "appropriately compensated in an orderly, consistent and efficient way", should they have lost out from "widespread failings by firms".
Accusations of mis-selling have sent shockwaves through the industry, with analysts at HSBC warning it could eventually cost lenders as much as £44bn.
Last October, the Court of Appeal ruled it was illegal for banks to pay commission to a car dealer without the customer's informed consent. The Supreme Court will hear an appeal against that judgement between 1 and 3 April.
The FCA said it would confirm within six weeks of the Supreme Court's decision if it is proposing a redress scheme.
Among the sector's main lenders, shares in Lloyds Banking Group were down 2% at 68.14p last at 1130 GMT. Banco Santander's London stock was 1% lower at 500p and Close Brothers was flat at 331.6p
Along with South Africa's FirstRand, Close Brothers is one of the two firms challenging the Court of Appeal ruling.
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