The £4 Billion Car Loan Heist: Is the City Watchdog Letting Banks Off the Hook?

Millions of British drivers who were victims of a widespread car loan scandal are facing a devastating financial blow, with a potential £4 billion in compensation hanging in the balance due to what critics are calling an “insulting” proposal by the UK's financial regulator.

Fury is mounting as consumer groups and legal firms accuse the Financial Conduct Authority (FCA) of dramatically short-changing victims. The controversy centres on the interest rate the FCA plans to apply to compensation payouts for the mis-selling of car finance. The watchdog has put forward a rate of just 2.09%, a figure that has been met with outrage.

Campaigners argue this proposed rate is a slap in the face to consumers, especially when compared to a landmark Supreme Court case that set a crucial precedent. In that case, brought by a driver named Marcus Johnson, judges ordered a “commercial rate” of interest to be applied. While the final terms remain confidential, industry experts widely believe the rate awarded was approximately 7%—more than three times what the FCA is now offering to the masses.

This percentage point difference isn't just academic; it translates into a colossal loss for the public. The FCA estimates that around 14 million finance deals were unfair, with an average payout expected to be around £700 per person under its current plan. However, applying the higher, court-backed interest rate would see that compensation pot swell by an estimated £4 billion, providing far more substantial redress to those who were exploited.

The discrepancy has led to serious accusations that the City regulator is failing in its duty to protect consumers. Claims firms and consumer advocates are questioning why a precedent set by the highest court in the land is being overlooked in favour of a reduced rate that ultimately benefits the banks responsible for the scandal.

As the battle intensifies, millions of drivers are left in limbo, watching as the body designed to protect them proposes a scheme that could see them cheated out of billions in rightful compensation. The question now being asked is whether the FCA will bow to pressure and deliver justice, or push ahead with a plan that many see as a profound betrayal.