The City watchdog will today announce its final plans for a compensation scheme for motorists ripped off in a car finance scandal.
Some 14m motor finance deals between 2007 and 2024 could be subject to payouts worth an average of £700 each, under a scheme proposed last year by the Financial Conduct Authority (FCA). The total cost is estimated at £11billion.
But the FCA has been lobbied by lenders to water down its plans. Others say the payouts to consumers should be bigger. It will publish final rules after markets close today.
The scandal centres on how car dealers were given commissions by lenders to sell loans to customers, and in some cases given juicier payouts for flogging pricier finance packages.
FCA chief executive Nikhil Rathi last week told MPs on the Treasury select committee that its consultation – which was extended after lenders asked for more time – had received more than 1,000 responses.
Rathi said: 'Much of it is conflicting feedback because this is a dispute that's been running for some time. It's more likely than not that we will go ahead with the scheme.
Decision time: The City watchdog will announce its final plans for a compensation scheme for motorists ripped off in a car finance scandal
'We will consider all the evidence from all sides that's been presented to us and then take a judgment in the round against our objectives.'
And Rathi defended setting up a scheme to deal with the scandal to avoid a saga which could prove 'very expensive' and 'run for many years'.
Millions of motorists to get car finance compensation this year
The outcome will be closely watched by lenders, who have already set aside billions to cover their estimated exposure to the compensation scheme.
Lloyds Banking Group has set aside £1.95billion and Santander has taken a £478m hit. Barclays says it is on the hook for £325m, while Close Brothers has made £300m available.
Banks have been critical of the scheme, with Lloyds saying it did not believe it 'reflects the actual loss to the customer'.
And Close Brothers boss Mike Morgan recently told The Mail on Sunday: 'You knew what you were paying for this car and you got the car. The customer got value throughout this.'
But a group of MPs last week claimed that 'drivers risk being short-changed' by the FCA's plans. They argued motorists should typically be receiving £1,200 in compensation, rather than £700.