The car finance scandal compensation scheme has been met with mixed reactions from experts across the motoring industry.
The Financial Conduct Authority outlined its long-awaited redress scheme this evening, which will see 12.1 million eligible agreements at an average redress of £829.
Drivers who were mis-sold car finance between 2007 and 2024 could be eligible if they were not told about hidden costs that would have helped the dealer or lender secure extra commission.
The redress scheme comes after months of consultations and planning by the FCA to ensure consumers and firms are protected from any aftershocks.
FIND OUT: Car finance compensation scheme could see 12 million drivers receive £829 - Are you eligible?
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In total, the scheme will cost firms £7.5billion in redress, in addition to £1.6billion in non-redress costs, bringing the total to £9.1billion, based on 75 per cent uptake.
Bobby Dean, Liberal Democrat MP for Carshalton and Wallington, said it was positive to see that the FCA had created a scheme to help drivers.
Despite this, he warned: "Though I fear that this is not the end of this long-running saga, with widespread rumours that lenders want to continue to evade responsibility and drag this out via the courts.
"Banks should think carefully about what signal this sends to consumers after being caught out for unfair practices."
READ MORE: Car finance compensation scheme confirmed with millions of drivers set to be owed £829
Experts have analysed the effectiveness of the planned car finance compensation scheme
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Mr Dean, who is a Member of the Treasury Select Committee, added that lenders should "accept responsibility and pay consumers what they are owed".
Stephen Braviner Roman, general counsel and chief risk officer at the FCA, explained that firms can pause the consideration of their complaint if they wish to take the matter to court.
However, if someone opts to do this, they would not be able to "go down both tracks at the same time" as they would be excluded from the FCA scheme.
This was emphasised by Nikhil Rathi, CEO of the FCA, who said firms should "think very carefully" about what is in the best interests of their clients.
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Nikhil Rathi, CEO of the FCA, confirmed that 12.1 million agreements could be included in the final redress scheme
| PARLIAMENT TVThey should also make sure issues are solved "smoothly and speedily", although he warned drivers about signing with claims management companies (CMCs) and law firms.
While drivers are able to use a CMC or law firm, they do not need to, and could end up losing up to 30 per cent of any compensation.
Shanika Amarasekara, chief executive of the Finance and Leasing Association (FLA), clarified that companies would need time to assess the details of the FCA scheme.
She outlined that any driver who suffered loss when sorting a car finance deal should be fairly compensated, although it was difficult for this to be confirmed with a "market of this size".
The vast majority of drivers will have received their compensation by the end of 2027 and the beginning of 2028 | FCAMs Amarasekara said: "If it is drawn too broadly so that it also compensates customers who suffered no loss, the only real winners will be Claimant Law Firms and Claims Management Companies.
"That cannot be the regulator's intention, considering that it has today had to launch a multi-organisational taskforce in an attempt to address the conduct of claimant firms operating in the motor finance market."
Similarly, Rachel Couter, head of UK contentious financial services at Osborne Clarke, said the industry was likely to view the FCA scheme with "real disappointment".
"Although the overall compensation bill has dropped from earlier proposals, the redress timetable looks tight for many lenders," she added.