Lenders could be set to pay out billions in motor finance claims

Abby Mercer, Solicitor

Following our recent update on the potential increase in claims against lenders, the Financial Conduct Authority has now confirmed that qualifying consumers are likely to receive an average of £700 each under their motor-finance compensation scheme.

The scheme will be free to use for consumers and encourages them to use the FCA’s website to submit a complaint if they took out motor finance agreements from 6 April 2007 to 1 November 2024. This scheme is likely to cover 44% of all motor finance agreements, under which around 2 million cars are sold each year.

Once the FCA’s scheme goes live, lenders will need to contact those who have complained via the FCA, and those who haven’t complained will be contacted by their lender within six months. It is predicted, therefore, that those who have already complained are likely to receive an outcome sooner.

Though the Finance & Leasing Association, a trade body for the motor-finance sector remains concerned that the costs are far too high, the FCA’s scheme will hopefully avoid a myriad of small claims being brought against lenders in court, and borrowers are being encouraged not to use claims companies or lawyers to bring claims, thereby reducing costs. The FCA’s scheme will likely avoid motor finance companies paying legal fees for potentially hundreds of thousands of claims and is expected to be a positive outcome for lenders.

If you are a lender and require any assistance in reviewing your current lending terms based on the motor-finance judgment, or if you require any advice on how to prepare for, and process, any potential compensation claims, please do not hesitate to get in touch with the dispute resolution team here at Kuits by telephoning 0161 832 3434.