What compensation can victims of mis-sold PCP expect, and how can they claim it?

According to recent proposals the FCA anticipates average payouts of £700 for each mis-sold agreement, a decrease from the earlier estimate of £950 per deal. This adjustment suggests that the total compensation cost will likely around £8.2 billion, at the lower end of previous estimates. The specific amount each consumer receives will vary based on the extent of harm experienced. Complaints related to four million finance agreements have already been filed, and those individuals do not need to take further action. The regulator advises anyone who has not yet complained to reach out directly to car loan provider instead of using third-party claims management companies, providing guidance on how to proceed. Under the proposed plans: - Lenders will reach out to individuals who have already raised complaints. If there's no response within a month, they will review the case and may issue compensation if warranted. - Those who have previously complained are likely to receive compensation more quickly once the scheme is operational. - Individuals who haven't complained will be contacted by their lender within six months the scheme's initiation, allowing them to opt-in for case reviews within six months. - Motor finance borrowers who do not receive communication—perhaps due outdated contact details—will have a year from scheme's start to submit a claim. The FCA aims to implement the compensation scheme by early 2026, with prompt payouts to follow. However, consultation due to lender pressure may push final rule confirmation to February March 2026. For some consumers, particularly those with changed information, it may take several months before they receive compensation. Regulators have cautioned claims management companies and law firms ensure consumers are not represented by multiple for the same claim and not subjected to excessive termination fees.

Who will cover the compensation costs?

The industry is expected to the full costs of the compensation scheme, including administrative expenses. Major lenders, including top UK banks and specialized motor finance firms, have already reserved over £3 billion for potential payouts. Some banks, like Lloyds and Barclays, increased their provisions in response to potential compensation costs, while others, such as Santander and Northridge Finance's parent company, have set aside significant as well. However, Adrian Dally from the Finance and Leasing Association expressed concern that the FCA may be "overcompensating," questioning the regulator's estimates of number of affected consumers. Despite this, bank share prices have remained stable since the announcement, and the FCA asserts that the proposed compensation scheme is in the best interest of both consumers and lenders, emphasizing the need to resolve the issue to maintain a reliable motor finance market for families.