(5 June 2025 – United Kingdom) The UK’s Financial Conduct Authority (FCA) has warned that any compensation scheme linked to the car finance mis-selling scandal must avoid destabilising the lending market, tempering expectations of a record-breaking payout.
“If many firms were to go out of business or withdraw from the market, this could . . . make it more expensive for consumers to borrow money to buy a car in the future,” the FCA stated. While stressing fairness to customers, the regulator also made clear that consumers would receive nothing if firms collapse.
The scandal, centred around undisclosed commissions paid to car dealers, could trigger one of the UK’s largest compensation efforts, with HSBC estimating potential costs to lenders at up to £44 billion. A pivotal Supreme Court ruling, expected this summer, will determine the legality of pre-2021 commission arrangements.
Lloyds Banking Group and Santander have already set aside hundreds of millions in provisions, while claims management firms circulate what the FCA called “highly speculative” redress figures. The regulator may opt not to follow ombudsman precedents when determining compensation.
Unlike customer-led complaints, a formal redress scheme would oblige firms to proactively compensate affected borrowers, a move likely to be more costly for the industry.
The FCA also aims to minimise reliance on fee-charging claims firms by designing a fast, accessible process for consumers. A broader review of the UK’s redress framework is underway to prevent future mass compensation crises.
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