Millions of UK citizens may be entitled to a higher compensation amount of £830 following a significant development in the car finance mis-selling issue. Despite this increase, there are concerns raised by legal firm HD Law regarding whether affected drivers are receiving the full amount they are rightfully owed as the compensation process progresses.

HD Law’s historical data indicates that drivers could potentially receive more than double the £830 sum suggested by the Financial Conduct Authority (FCA). It was recently disclosed that compensation will be distributed for over 12 million car finance agreements that were mis-sold between 2007 and 2024.

Although the FCA mentioned a reduced number of eligible claims compared to the initial projection, the average payout has now risen to approximately £830 per agreement. The FCA estimates that 75% of eligible consumers will submit claims, with the total redress amounting to £7.5 billion if all claims are made.

Previously, the FCA had forecasted an average payout of around £700 for drivers under the scheme, with a potential total cost exceeding £8 billion. Nevertheless, the new figure of £830 does not accurately represent the potential individual compensations that consumers could receive if they opt to pursue their claims through legal channels.

If you purchased a car, van, or motorcycle through PCP or Hire Purchase between 2007 and 2024, you might be among the numerous individuals entitled to financial remuneration. Approximately 14 million agreements were improperly sold, and under the proposed scheme by the FCA, individuals could seek compensation if they secured motor vehicle finance for a car, van, motorcycle, or campervan between April 6, 2007, and November 1, 2024.

HD Law aims to secure a complete refund of the commission paid, and with the option for a judicial review of the entire lending agreement, payouts have the potential to be significantly higher. As a result, customers of HD Law presently receive an average of £1,846.23 per financed vehicle, supported by the firm’s impressive Trustpilot score of 4.7.

Kevin Durkin, Director of HD Law, expressed dissatisfaction with the FCA’s redress figure, highlighting the disparity between the proposed compensation and what consumers may be legally entitled to receive through the courts. Individuals who suspect they were victims of car finance mis-selling have the option to participate in a free redress scheme proposed by the FCA, expected to commence in 2026.

While the FCA scheme is voluntary, consumers retain the liberty to pursue legal action via the courts if they prefer. The FCA offers guidance and a template letter on its website for affected drivers who believe their vehicle finance agreements were mishandled. Lenders will be responsible for contacting eligible customers once the scheme is operational.

Lenders are required to inform complainants within three months from the conclusion of the implementation period about potential compensation amounts owed. Therefore, individuals who have already lodged complaints or do so before the implementation period concludes will likely receive compensation sooner. Eligible cases must involve Personal Contract Purchase or Hire Purchase agreements designed for personal use, excluding leased vehicles.

Those eligible for compensation were subjected to discretionary commission arrangements, which were agreements between car dealers and lenders. These arrangements resulted in dealers receiving commissions from lenders based on customer interest rates, often leading to inflated charges for consumers. Such agreements were prohibited by the FCA in 2021 to protect consumers from such unfair practices.