Car finance compensation scheme faces challenge and delay

Car finance compensation scheme faces challenge and delay8 minutes agoShareSaveAdd as preferred on GoogleKevin PeacheyCost of living correspondentGetty ImagesA consumer group is planning a legal challenge to a scheme designed to compensate millions of drivers who were mis-sold motor finance agreements.Consumer Voice said the City regulator's scheme, which is expected to cost lenders a total of £9.1bn, left "too many people short-changed".Payouts averaging £829 per person were due to begin this summer, under the Financial Conduct Authority's (FCA's) plans.But the latest development, which could be one of several legal challenges, may delay those compensation payments.Alex Neill, co-founder of Consumer Voice, said: "Millions of drivers were overcharged through hidden and unfair commission, yet the FCA's scheme risks leaving many of them missing out on hundreds of pounds they're owed."People have already been let down once by lenders. They should not now be let down again by the regulator that is supposed to protect them. The FCA needs to fix the scheme to ensure it delivers fair and lawful compensation for drivers."The FCA refused to say whether it had been notified of any other legal challenges to the scheme."Our scheme is the quickest, fairest way to compensate consumers. It seems contradictory that organisations claiming to represent consumers would seek to delay payouts for millions of people," a spokeswoman for the regulator said.Millions of drivers mis-sold car finance to receive average £829 in compensationThe vast majority of new cars, and many second-hand ones, are bought with finance agreements.In 2021, the FCA banned deals where car dealers received commission from lenders, based on the interest rate charged to the customer. These were known as discretionary commission arrangements (DCAs) and were often not disclosed.The FCA said this provided an incentive for a buyer to be charged higher interest...