Millions in line for payouts over car finance mis-selling scandal

FCA proposes redress plan, but victims may get less than £950 each

- Kalyeena Makortoff

Millions of drivers could be handed a share of a multibillion-pound compensation package after the City regulator said it would open a redress scheme for consumers affected by the car finance scandal.

The Financial Conduct Authority (FCA) will consult on the scheme, which could cost banks between £9bn and £18bn when it begins paying consumers compensation next year. But motorists mis-sold car finance were warned that they were likely to get less than £950 per claim.

The watchdog set out the plans yesterday after the supreme court last week largely overturned a ruling that could have led to a payout of £44bn, a similar scale to the payment protection insurance (PPI) scandal.

Bobby Dean, a Lib Dem MP and member of the influential Treasury committee, said the issue was "the biggest consumer finance scandal since PPI". "The compensation bill is likely to surge above £10bn. Industry must learn that honesty matters and adjust their practices," he said.

The FCA said it was unlikely that the price of its redress scheme - which will include administration costs - would be much lower than £9bn and it could be "materially higher". It said while some scenarios put the total cost at £18bn, it considered estimates at the mid-point "more plausible".

The regulator will start consulting on the scheme by October, and plans to include motorists harmed by discretionary commission arrangements. In most cases, payouts would be less than £950, it added.