Motorists impacted by the car finance scandal could lose hundreds of pounds when they receive compensation if they use a claims management company.
The Financial Conduct Authority (FCA) has issued a fresh warning to motorists about the impending redress scheme that impacts millions of drivers.
It confirmed that 12.1 million agreements would be eligible for compensation at a total cost of £9.1billion, worth an average redress of £829 per agreement.
To ensure drivers receive their compensation, the UK’s financial regulator has launched a £2million advertising campaign.
The adverts will run across TV, radio, print, billboards and social media, and will help people feel more confident about making a complaint when dealing with their car finance.
It will direct drivers to a free template complaint letter on the FCA’s website that relates to the disclosure of motor finance arrangements.
The FCA has previously warned that drivers attempting to get compensation through a law firm or claims management company (CMC) could lose more than 30 per cent of the money owed.
A survey from the FCA found that 27 per cent of car finance customers were not confident in making a complaint without using a CMC or law firm.
Drivers are being warned that they could lose up to 30 per cent of their compensation if they go through a law firm or CMC
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GETTY
This is despite free tools from the regulator being available for motorists as part of its response to the car finance scandal.
Almost three in five motorists added that they have made or are considering a claim, although 23 per cent said they were unsure of what options were available to them.
Sheree Howard, executive director at the FCA, said: “Many people who may be owed compensation aren’t sure where to start or don’t realise they don’t have to pay someone to make a complaint.
“Our free tools are there to help people feel claim confident – so they can get any money owed back without it costing them a penny.”
FCA boss Nikhil Rathi praised the redress scheme, noting that it would put money back in the pockets of drivers | GETTY
The FCA’s new advertising campaign will run from July 27 to September 6, while resources will remain on the regulator’s website.
When the compensation scheme was announced in March earlier this year, the FCA estimated that the vast majority of claims would be settled by January 2028.
At the start of July, the FCA announced that its motor finance redress scheme had been partially suspended as it waits to hear legal challenges in December 2026 or February next year.
The Upper Tribunal will hear legal challenges from Consumer Voice, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance.
The FCA originally planned for the majority of drivers to receive their compensation by the end of 2027 and the beginning of 2028 | FCA
Firms will not be required to calculate or pay redress, or send communications about compensation owed under the scheme, until the Upper Tribunal process ends.
The FCA outlined that if the scheme is upheld and the judgement isn’t appealed, payments under the scheme are expected to begin in 2027.
If the scheme is overturned in whole or part, the regulator needs to decide what to do next, which will likely delay the compensation.
In the event that the FCA seeks views on a revised scheme, they could face a further legal challenge, with the regulator warning that “compensation could be delayed until 2028 or beyond”.