What you need to know about the car finance compensation scheme

Chances are you've heard about car finance and a new compensation scheme for people who may have been mis-sold credit to buy a vehicle. By the look of my postbag many readers are flummoxed about what the announcement means. Here's a guide to your rights.

- MARTYN JAMES

The Financial Conduct Authority (FCA) has announced proposals for a compensation scheme for millions of drivers who may have been mis-sold deals to buy a car or vehicle on finance

Key points to remember are:

■You need to have been sold a motor finance agreement taken out between April 6, 2007 and November 1, 2024.

■The compensation scheme only applies if you were sold an unfair contract, given inaccurate information or excessive commission was paid by the lender to the broker.

■It's estimated the scheme will apply to just under half of people (44%) who were sold policies during this period.

■The FCA estimates up to 14.2 million people are affected.

■Lenders could pay out £8.2billion in compensation.

■The average payout is predicted to be £700 - but the sum will vary.

■Bear in mind these are proposals. We'll know for sure what's happening in early 2026.

What's the reason behind it?