Britain's Motor Finance Industry to Face Bill for Unfair Car Loans
The Financial Conduct Authority (FCA) estimates that Britain's motor finance industry could owe between 8.2 billion and 9.7 billion pounds to compensate consumers for unfair car loans. This estimate is less than previously feared by the sector. The FCA plans to compensate eligible consumers who signed unfair loans between 2007 and 2024.
The Financial Conduct Authority (FCA) has disclosed plans for Britain's motor finance industry to compensate consumers with unfair car loans, amounting to an estimated 8.2 billion to 9.7 billion pounds.
FCA Chief Executive Nikhil Rathi remarked on the necessity for fair compensation, highlighting past non-compliance within the sector. Under the new scheme, individuals who were part of the 14.2 million unfair motor loans signed between 2007 and 2024 could receive an average compensation of 700 pounds.
The discovery of discretionary commission agreements (DCAs) that allowed dealers to earn fees by increasing loan interest rates has been a significant factor. Despite the FCA's previous higher compensation estimates, this scandal remains costly for banks, with potential claims already prompting lenders to reserve over 2 billion pounds.
(With inputs from agencies.)
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