Who will be eligible for FCA payment?

Around 12.1 million car finance deals will be eligible for compensation, with the average payout coming to £829, the Financial Conduct Authority has said.

People will only be considered for compensation if they weren’t told details of at least one of three car finance arrangements between their lender and their broker. 

These three arrangements are: 

1. A discretionary commission arrangement (DCA) – this would have allowed the broker to adjust the interest rate the customer would pay to obtain a higher commission.  

2. A high commission arrangement – this covers any deals where the commissions was equal to or greater than at least 39% of the total cost of credit and 10% of the loan. 

3. Contractual ties – these arrangements would have seen a lender given exclusivity or a right of first refusal

This will apply except in cases where the lender can prove there were visible links with the manufacturer and dealer.  

However, there are some exceptions. 

Cases will be considered fair if: 

• The commission was £120 or less for agreements beginning before 1 April 2014 and £150 or less from that date. 
• The borrower wasn’t charged interest. 
• The DCA  wasn’t used to earn discretionary commission.
• The lender can prove, in certain limited circumstances, it was fair not to disclose one of the arrangements above or that the consumer did not suffer any loss.