FCA Launches £8.2B Car Loan Redress Scheme After Supreme Court Ruling
The UK's Financial Conduct Authority (FCA) has announced a significant redress program for customers who were missold car loans. This follows a Supreme Court ruling that dealers should only pay compensation for serious abuses. The program aims to address concerns about the duties of care car dealers owe to their customers regarding loan arrangements.
The FCA estimates that lenders have already received over 4 million complaints from affected customers. The total compensation expected to be paid out is £8.2 billion ($11 billion). However, this figure could reach £9.7 billion if all eligible consumers participate. The estimated implementation and running cost of the scheme is £2.8 billion, bringing the total to £11 billion if there's an 85% take-up.
Lenders will be responsible for identifying and inviting customers who haven't complained to participate in the compensation program. They will contact customers and include them unless they opt out. The FCA previously expected compensation costs to range between £9 billion and £18 billion, with the latest estimate assuming 85% of eligible consumers will participate in the redress scheme.
While there is no specific information about British vehicle manufacturers involved in the decision to suspend the redress program, significant decisions around such programs typically involve major automotive players. The FCA's move is expected to provide substantial relief to customers who were missold car loans, with the total compensation cost reaching potentially up to £9.7 billion.
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