The United Kingdom’s financial regulator has sounded the alarm on a growing crisis to its Members of Parliament. Next year millions of motorists will be compensated due to the mis-selling of car loans. This announcement follows on the heels of the introduction of a new compensation formula. It goes after problems associated with motor finance mis-selling that have harmed hundreds of thousands of car purchases throughout the country.
The new compensation scheme comes in direct response to a recent ruling from the UK’s highest court. That ruling exposed that a majority of car loan agreements contained discretionary commission structures, resulting in discriminatory credit offers. That potentially affects a huge number—14.6 million—of such agreements. That makes a large proportion of drivers eligible to receive a damages award. The payouts will focus on two main areas: the commission structures between lenders and dealers, and the inaccurate information provided to buyers regarding their financing options.
Although the regulator has provided details of its planned approach, it is running into difficulties with cooperation from certain companies participating in the program. These companies and others have continued to withhold critical information. This has prompted the backpedaling regulator to consider publicly shaming firms that didn’t heed its demands. But so far, no individual companies have been named.
As a result, the eligibility criteria for compensation will be tougher than previously expected. Only a select group of individuals who experienced unfair contract terms due to high commissions paid to dealers, or who received misleading information about securing the best finance deal, will qualify for compensation. This dramatic narrowing of eligibility stands to dramatically decrease the total number of motorists who eventually receive payouts.
It’s a sign that the financial regulator is getting bolder in its own enforcement efforts. They even have the new clear bus stops, output of the humanlike AI. They first used this tactic when they closed the Payment Protection Insurance (PPI) scandal. This clever campaign included Arnold Schwarzenegger’s dismembered head and pre-recorded voice in a unique tactical campaign. As for the awareness campaign, it turned out to be an amazing success. By the end of the PPI scheme, nearly 34 million consumers had received an average compensation of nearly £1,000 per consumer.
This follows the regulator’s current £222 compensation scheme, expected to reach millions of drivers mis-sold car loans. Far fewer people became eligible than we first projected. Consequently, many are still unsure whether or not they are entitled to compensation for these mis-sold agreements.