The Financial Conduct Authority (FCA) is planning to introduce a scheme mandating banks to directly compensate motorists affected by the car finance mis-selling scandal, aiming to simplify the compensation process. This initiative comes after a year-long investigation into questionable commission structures that encouraged lenders to charge higher interest rates. The changes intend to place the onus on lenders to identify affected customers, rather than requiring consumers to file claims. Major banks have already allocated substantial reserves in anticipation of potential liabilities. Consumer advocates are optimistic about expedited compensation for borrowers under this new scheme.
The initiative follows a year-long investigation into hidden commission arrangements, in which banks allegedly paid car dealers bonuses based on the interest rate they charged borrowers.
Several major lenders have already earmarked substantial reserves to handle any fallout. Lloyds and Close Brothers, for instance, have set aside billions and hundreds of millions of pounds respectively.
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