Millions or motorists were mis-sold car loans with an earlier ruling saying they were each entitled to an average of £829
Motorists who were mis-sold car loans are set to receive compensation after one lender said it would not contest a ruling. Payouts are due on about 12.1 million deals from an array of lenders, after years of unfair motor finance deals.
Now Santander has agreed to pay compensation for its portion of the missold deals. The bank said on Saturday it would not “challenge” the decision.
Payouts are due on about 12.1 million mis-sold deals from an a number of different of lenders at an average of £829 each, the financial watchdog said in March as it unveiled plans for its redress scheme. The Financial Conduct Authority (FCA) expects the total amount of redress paid under its scheme to be about £7.5 billion, based on about 75% of eligible consumers making a claim.
It thinks millions of claims will be paid out this year and the vast majority settled by the end of 2027. A spokesperson for Santander said today: “We have decided not to challenge the schemes and will now focus on their implementation.”
Lenders can start making payments immediately and people who have already complained are likely to get paid first, the FCA said at the end of last month. Most of the car finance deals covered involve so-called discretionary commission arrangements (DCAs), which were banned in 2021.
This refers to arrangements whereby brokers, including car dealers, were able to increase interest rates on car loans so they could get more commission. The FCA said this led to unfairness for customers who were not properly informed about the arrangement and therefore did not have the opportunity to negotiate or find themselves a better deal.
People who were not told about a deal involving high commission or a contractual tie to a firm are also eligible for compensation. The programme covers agreements taken out between April 6 2007 and November 1 2024.
On reaching its payout decision, Santander added: “This was a finely balanced judgment reflecting our primary desire to bring greater certainty to our customers, shareholders and the wider motor finance sector, factors which outweighed our disagreement with elements of the proposed schemes.
“We will continue to work constructively with regulators and policymakers to seek to improve the competitiveness of the UK in the interests of all our customers, taxpayers and investors.”
The FCA made changes to the long-awaited redress scheme’s format after receiving more than 1,000 responses to a consultation. This came from a number of different parties including motor finance lenders, consumer groups, carmakers and industry bodies.
The initial proposals drew criticism from both sides. Lenders and car finance providers raised concerns that the level of redress was too high and did not accurately reflect what customers lost, while consumer groups and some MPs argued that motorists would be short-changed under the plans.
The feedback has resulted in it tightening the eligibility criteria so only those who were treated unfairly will get compensation, according to the FCA. It expects around a third of cases to be capped to ensure consumers will not be paid too much.
