Car loans redress scheme could rob victims of £4bn, critics say

Victims of the car loans scandal could miss out on over £4bn in compensation if the City regulator goes ahead with plans for an “insulting” interest rate in its redress scheme, consumer groups and claims law firms say.

- Kalyeena Makortoff

The Financial Conduct Authority (FCA) has been accused of offering a reduced rate of interest that will be added to compensation from banks for borrowers caught up in the car loan commissions scandal.

Claims law firms and consumer groups say borrowers should be offered the same terms as Marcus Johnson: the sole driver whose case was upheld by the supreme court in a landmark case in August.

While the terms of the final payout are sealed, Johnson is widely believed by industry experts to have received about 7% interest on his compensation package, after judges ordered the parties to negotiate a “commercial rate”. But the watchdog has proposed a rate of 2.09% on the compensation.

The FCA has estimated that victims’ payouts will average £700 resulting from 14m unfair loans, costing lenders - including Lloyds, Barclays, Close Brothers and the financial arms of manufacturers such as Ford - a combined £11bn.