More than 23 million people believe they could be due compensation for a mis-sold car loan, according to a poll before this month’s supreme court decision.
Borrowers, banks and the government are anxiously awaiting the ruling, which could trigger one of the biggest redress schemes since the £50bn payment protection insurance (PPI). The PPI saga forced UK banks to compensate people who had bought often worthless insurance cover.
The survey, conducted for the consumer law firm Slater and Gordon, found that 45% of people think they might be entitled to a payout over a car finance plan taken out between 2007 and 2021.
The car loans scandal has been rumbling on for more than a year, but ballooned in October when a court of appeal judgment vastly expanded a Financial Conduct Authority (FCA) investigation into potentially harmful commission arrangements.
It determined that paying a secret commission to car dealers, which had arranged the loans without disclosing the sum and terms of the commission to borrowers, was unlawful.
Lenders including Santander UK, Close Brothers, Barclays and Lloyds are potentially on the hook for up to £44bn, according to some analysts.
The FCA is working on a potential compensation scheme under which lenders that mis-sold loans would check their records and decide who gets compensation.
The public’s expectations of compensation are high, according to the survey.
Of the 4,000 people surveyed, 45% believed they were likely to be eligible for money back, which equates to more than 23 million adults across the UK. Forty per cent said they would consider a legal challenge if dissatisfied with the outcome of their claim. Consumers also showed little trust in the ability of banks and lenders to check records and distribute compensation.
There are also concerns that some consumers could miss out because most banks purge customer data after six years. The FCA ordered lenders to cease doing so in January 2024, when it launched the investigation, but files relating to customers with contracts that ended more than six years earlier may have already been lost.
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The chief operating officer of Slater and Gordon, Elizabeth Comley, said the public rightly expected to be compensated for their losses.
“The FCA is trying put things right, but there’s a risk that a redress scheme leaves many people disappointed and keen to challenge the process,” she said.
“That sort of backlash would be bad for everyone – the scandal would drag on for years, the courts would be inundated with challenges and the public would be denied the clear resolution they want.”