The Financial Conduct Authority (FCA) has announced a significant development in the UK car finance market, with an estimated 14 million people potentially eligible for compensation under a newly established car finance compensation scheme. The scheme aims to address widespread mis-selling of vehicle finance products that occurred between April 2008 and January 2020, affecting millions of consumers who may have been unfairly charged for car finance.

The FCA initiated a review in 2020 following concerns that customers were not always given clear information about the cost of borrowing when purchasing cars on finance. Specifically, the review focused on whether customers were informed that discretionary commission payments could be earned by dealerships based on the finance products they sold. The compensation scheme will assess whether customers were charged unfairly due to these commission structures, and if mis-selling is identified, customers could be entitled to redress, which could include refunds of commissions, interest, and other charges.

The exact amount of compensation will vary depending on the individual circumstances of each case, and only those who demonstrably suffered a loss as a result of the mis-selling will receive compensation. The scheme is a significant step towards providing justice for consumers who may have been unfairly charged for car finance. The FCA encourages individuals to gather any relevant documentation related to their car finance agreements to prepare for the claim process, and further updates and guidance will be provided on the FCA's website as the scheme progresses.