The Financial Conduct Authority's (FCA) proposed interest rate for a redress scheme aimed at compensating car loan victims could leave consumers out of pocket by millions. Critics are labeling the 2.09% offer as "insulting" and claim it will deprive drivers of approximately £4 billion in compensation.
At stake is a total of £11 billion, with banks including Lloyds and Barclays expected to foot most of the bill after lenders were found guilty of unfair loan commission payments. The FCA estimates that around 14 million historic car loan contracts may be deemed unfair due to these commission payments, resulting in an average payout of £700 per affected driver.
However, some experts argue that a more substantial interest rate - closer to 8% - would provide fairer compensation for those who have suffered under unfair relationships with lenders. The 8% rate is comparable to the amount historically paid out alongside successful county court cases and by the Financial Ombudsman Service before its rates were reduced.
"We believe that the FCA's interest rate proposal of 2.09% is far too low," said Martin Lewis, founder of MoneySavingExpert. "It would leave consumers losing out on significant amounts of money."
The FCA has argued that its proposed interest rate aligns with the approach taken by the Financial Ombudsman and reflects changes to compensation payouts at the ombudsman service.
However, consumer advocates remain unconvinced, stating that the 2.09% offer is "unacceptable" and would leave drivers losing out on approximately £4 billion in compensation. Consumer Voice co-founder Alex Neill described the proposed rate as "clearly unworkable," suggesting it would be unrealistic to expect borrowers to negotiate for a fairer interest rate themselves.
In contrast, the Financing and Leasing Association has stated that its own proposals reflect changes made by the Financial Ombudsman, which have been applied to the FCA's redress scheme.
At stake is a total of £11 billion, with banks including Lloyds and Barclays expected to foot most of the bill after lenders were found guilty of unfair loan commission payments. The FCA estimates that around 14 million historic car loan contracts may be deemed unfair due to these commission payments, resulting in an average payout of £700 per affected driver.
However, some experts argue that a more substantial interest rate - closer to 8% - would provide fairer compensation for those who have suffered under unfair relationships with lenders. The 8% rate is comparable to the amount historically paid out alongside successful county court cases and by the Financial Ombudsman Service before its rates were reduced.
"We believe that the FCA's interest rate proposal of 2.09% is far too low," said Martin Lewis, founder of MoneySavingExpert. "It would leave consumers losing out on significant amounts of money."
The FCA has argued that its proposed interest rate aligns with the approach taken by the Financial Ombudsman and reflects changes to compensation payouts at the ombudsman service.
However, consumer advocates remain unconvinced, stating that the 2.09% offer is "unacceptable" and would leave drivers losing out on approximately £4 billion in compensation. Consumer Voice co-founder Alex Neill described the proposed rate as "clearly unworkable," suggesting it would be unrealistic to expect borrowers to negotiate for a fairer interest rate themselves.
In contrast, the Financing and Leasing Association has stated that its own proposals reflect changes made by the Financial Ombudsman, which have been applied to the FCA's redress scheme.
theyve been ripped off already and now the fca wants to hit them with more 
a 8% rate would be way more reasonable imo, i mean who does that kinda compensation sound right to anyone? 
. I think the FCA needs to rethink their proposal. I mean, why settle for just 2.09% when it could be more like 8% like Martin Lewis suggested 
. It's not like the banks are getting off scot-free here, they're still paying out a big chunk of the £11 billion. It just doesn't seem right that consumers would have to foot the bill for something they didn't do wrong 
. I'm with Alex Neill on this one, 2.09% is just not enough 
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. The FCA needs to listen to the experts and do some real damage control here 
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. The FCA is just trying to save a buck or two, but at the end of the day, it's still consumers who are losing out. 
. £4 billion is a huge chunk of change, and 14 million people are affected... that's like, a lot of people losing out on money 
. what do the experts say about this? where did the fca get that number from? 
I mean, what even is that? £700 payout per person seems good but it's not worth the stress and hassle of going through all that drama. Why can't they just give us a decent chunk of change like 8% interest rate experts are saying? It's not like it's gonna break the banks or anything 
I remember back in the day when we had those court cases against the banks and they had to pay out a lot more than that. It was like, you know, if someone wronged you, they had to make it right 
. I mean, 2.09% is really low considering all those people who got screwed by banks on unfair loan commission payments. It's like they're trying to rip off consumers even more after being found guilty of wrongdoing 
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14 million people are gonna be affected 
that's like, a lot of money 
it's like they're saying "you know what? we messed up and now we gotta pay" 
It's crazy how some of these banks thought they could get away with charging those unfair commission fees. Now it seems like they're trying to pass the buck and leaving consumers high and dry. £4 billion is a pretty big chunk of change and I think 2.09% is being very generous, to say the least. My mate was getting a similar interest rate on his loan back in 2018 and it was already stressing him out.