UNCERTAINTY CLOUDS FINANCE COMPENSATION CLAIM SCHEME

Millions are still due redress after court ruling but details remain unclear

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Car buyers and banks are bracing themselves for the outcome of a review into a multi-billion-pound scheme designed to compensate borrowers who paid too much commission for car loans.

However, critics say the scheme may be overly broad and complex, potentially delaying claim resolutions for years.

It follows a year-long battle between lenders, legislators and even the government over three cases centred on salespeople being incentivised to charge higher interest rates without the knowledge of buyers - so they could bank an increased commission.

This ended at the start of this month with a landmark ruling at the Supreme Court. Lord Robert Reed ruled that in two of the cases, such arrangements (known as discretionary commission arrangements, or DCAs) were legal, but in the third, known as the Johnson case, the value of the commission (more than half the sale price) and how it was disclosed pointed to an unfair relationship between banks and car dealers, making it illegal under the Consumer Credit Act.

In the wake of the rulings, the Financial Conduct Authority (FCA) announced it would consult the finance industry on a scheme to compensate car buyers who paid excessive commission charges on car loans going back as far as 2007.

The pot for those affected is set to be between £9bn and £18bn. While incredibly large, that is less than half the forecasted £44bn and leaves lenders - especially the likes of Black Horse — celebrating the rulings.

In the review, which is set to be published in October, the FCA will examine how lenders should assess claims and what compensation may be due.

There are concerns, however, that the process risks being held up by the complex natures of the cases as well as contradictory views held by the FCA and courts.