LONDON – Britain’s motor finance industry faces a bill of $12 billion (£9.1 billion) to compensate consumers for unfair vehicle loans, the Financial Conduct Authority (FCA) announced on Monday. This marks the final calculation for one of the UK’s most significant financial mis-selling scandals.

The FCA’s investigation focused on discretionary commission arrangements (DCAs) used by motor finance providers. These arrangements allowed dealerships to receive extra commission based on the interest rate they charged customers. The regulator found that these arrangements could have resulted in customers paying more for their car finance than they should have.

The FCA determined that the DCAs were not consistently disclosed to customers, meaning they were unaware of the potential impact on the interest rates they were paying. This lack of transparency constituted a mis-selling practice, requiring firms to offer redress to affected consumers.

The total compensation bill of £9.1 billion ($12 billion) represents the estimated amount needed to compensate approximately 11 million affected customers. The FCA has instructed firms to identify and contact eligible customers to offer redress. The process is expected to take some time, and firms are working to establish systems to calculate appropriate compensation amounts.

This mis-selling scandal highlights the importance of transparency and fairness in financial products. The FCA’s action aims to ensure that consumers are treated fairly and receive appropriate compensation for past mis-selling practices. The regulator will continue to monitor the situation and take further action if necessary to protect consumers.