As the FCA warns banks to prepare for a redress scheme, Martin Lewis has predicted how much compensation drivers may get for the finance scandal.
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The Money Saving Expert founder gave an update for drivers who made a claim for mis-sold car finance (Image: Getty)
The Money Saving Expert founder Martin Lewis has given drivers an update on the ongoing car finance scandal, predicting how much victims may receive in compensation. The Financial Conduct Authority (FCA) has warned banks to prepare for an industry-wide redress scheme for drivers who were mis-sold car finance between 2007 and 2021.
Taking to his page on the social media platform X, Martin Lewis suggested that the amount drivers could receive from the scandal is currently unknown but could be around £1,400. He explained: “I hear work is being done at the FCA on the level of compensation for DCA [Discretionary Commission Arrangements] claims, yet from what I understand, no decision has been made yet. My pure guess is it will be… Method 1: All the extra interest that was charged due to the DCA comes back. This would typically be around £1,400 per arrangement.”
Between 2007 and 2021, some dealers and brokers inflated interest rates without customers knowing (Image: Getty)
Between April 2007 and January 2021, a number of car dealers and brokers inflated the interest rates on car finance agreements without customers’ knowledge to earn higher commissions.
The Court of Appeal has ruled that, if car finance agreements did not make customers aware of the commission, they were unlawful. However, no decision has been made over how much victims will receive in compensation.
The Supreme Court is due to hear the case during the first days of April 2025, with many stating that the redress will depend heavily on the court’s decision.
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It is currently unknown how much drivers who claimed will receive in the FCA’s redress (Image: Getty)
Martin noted that, if the payout is not based on the extra interest that was charged, a ‘fair interest rate‘ could be created.
He added: “Method 2: It may set up a ‘fair interest rate’ (for those in the know, mirroring Plevin in PPI) and only refund amounts above that. This would therefore result in a lower payout than the first method.”
In this case, drivers would generally receive a lower amount, depending on how much their interest rate was inflated against a certain figure.
Whatever the case, a spokesperson for the FCA highlighted that they want to provide a fair amount to drivers who were left out of pocket by the DCA.
They continued: “We want to provide as much certainty as possible to firms, consumers and stakeholders.
“So, we are confirming that if, taking into account the Supreme Court’s decision, we conclude motor finance customers have lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme.”
