Millions of customers could receive £950 payout following car finance ruling
Millions of customers could be set to receive a hefty £950 payout following Friday's landmark car finance ruling.
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The financial watchdog has said it will consult on a compensation scheme for people who bought motor finance and were treated unfairly.
The announcement comes after the Supreme Court ruled banks were not liable for hidden commission payments in car finance schemes.
Nikhil Rathi, chief executive of the Financial Conduct Authority, said: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated.
“We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.
“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get.
“It will take time to establish a scheme but we hope to start getting people any money they are owed next year.”
The landmark ruling concerned the non-disclosure of commission - a factor that impacts consumers in around 99% of all car finance deals.
Speaking on Friday, Supreme Court President, Lord Reed, instead chose to overturn a previous judgement handed down by the Court of Appeal in the case of three motorists who were unaware of the 25% commission.
it means that finance companies did not deceive customers by not disclosing hidden fees.
Lord Reed outlined the history of the case and wide-reaching ramifications as part of his ruling.
He said "we are giving judgment at this time to prevent market disorder," as he outlined the timing of the decision, which took place after trading hours.
He added the payments "were not a bribe".
When a car is purchased on finance, it effectively acts like taking out a loan, with the cost of the vehicle paid off in monthly insurance.
These loan repayments have interest applied which is organised by brokers, who earn money in the form of a commission as a percentage of the interest payments.