UK car owners warned over finance compensation alerts | Personal Finance | Finance

Millions of Brits are being urged to remain vigilant as fraudsters posing as car finance lenders with counterfeit offers of compensation are on the rise.

The Financial Conduct Authority (FCA) has reported an increase in instances where scammers have been contacting people, offering bogus compensation in return for personal details such as their name, address, date of birth and banking information.

This warning comes on the heels of the FCA’s recent announcement regarding a potential car finance compensation scheme. However, the city watchdog is keen to remind the public that no such scheme is currently in operation.

Furthermore, the FCA has stated that car finance lenders are not yet reaching out to customers about compensation. People are strongly advised to terminate any such calls immediately and refrain from divulging any personal information.

Any scam calls or texts should be forwarded to 7726, reports the Daily Record.

Many banks have now adopted the easy-to-remember 159 phone number service, which connects worried customers directly to their bank if they receive any suspicious contact.

Nisha Arora, director of special projects at the FCA, warned: “We’re aware of scammers calling people and posing as car finance lenders, offering fake compensation and asking for personal details. There is no compensation scheme in place yet. If anyone receives a call like this, hang up immediately and do not share any information.”

The Financial Conduct Authority (FCA) has recently revealed plans to consult on a compensation scheme, following revelations that many motor finance firms were flouting rules and laws by failing to provide customers with relevant information about commission paid by lenders to car dealers who sold the loans.

In a nutshell, car finance customers could be in line for a payout after the FCA announced its intention to consult on an industry-wide compensation scheme. This comes in the wake of a Supreme Court ruling on 1 August on cases where the FCA had intervened.

While not all motor finance customers will receive compensation, as commission payments were legal in many instances, the court ruled that failure to properly disclose commission arrangements could be deemed unfair and therefore unlawful in certain circumstances, according to the FCA.

The financial watchdog estimates that most people are likely to receive less than £950 in compensation. The total cost of any potential compensation scheme is projected to range between £9 billion and £18 billion.

The consultation is set to be launched by early October. If the compensation scheme gets the green light, the first payouts should be made in 2026.

Those who have already lodged complaints need take no further action, the FCA confirmed.

Motorists concerned they weren’t informed about commission arrangements and suspect they overpaid their motor finance provider should submit complaints immediately.

Consumers needn’t engage claims management firms or legal representatives, as doing so could slash potential compensation by approximately 30%, the watchdog warned.

Money-saving guru Martin Lewis recently posted on X (formerly Twitter): “there’s no harm in putting a DIY complaint now to see if you had a Discretionary Commission Arrangement”.

The FCA will establish guidelines ensuring lenders handle compensation claims “consistently, efficiently and fairly”, determining both eligibility and payment amounts.

The regulator pledges to oversee firms’ compliance with these rules and intervene where necessary.