Drivers may be forced to wait until next year for compensation from a car finance repayment issue which saw motorists massively overpaying costs.
The Financial Conduct Authority (FCA) said the extension would allow companies enough time to respond to all customer complaints.
The car finance issue saw drivers overpay interest rates when purchasing a vehicle between 2007 and 2021.
In response to numerous complaints, the UK watchdog decided to step in and was due to announce its decision on the issue on September 25, 2024.
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The FCA has delayed the decision until next year
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However, the FCA flagged that this deadline would not give car loan companies enough time to respond to complaints.
As a result, the deadline for the regulator to respond to the financial error has now been extended until May 2025.
Experts had suggested that drivers could receive a £750million payout, although this figure may reach as much as £1billion. Money Saving Expert Martin Lewis even compared it to the PPI scandal.
Drivers who are now owed money, overpaid through the Discretionary Commission Arrangement, which was rarely publicised to consumers, meaning they were paying more than necessary.
Under DCA schemes, drivers were charged more each month for car repayments which went straight to brokers and car dealers who received the money as commission.
The review was launched at the start of the year following concerns that many people were overcharged with their car loan repayments.
Notably, more than 1.2 million complaints were registered via the Martin Lewis Money Saving Expert website. In response to the delay, Lewis shared on X that it was “clearly disappointing” for drivers waiting for payouts.
He said: “Most important thing people can do is log their complaint asap, so that if there is a time bar, hopefully there’s less chance of it being ruled out of time.”
The selling practice was banned in 2021 after it was found that some brokers adjusted the interest rates purposefully tocharge customers more so they could receive the difference in commission.
The FCA detailed that it introduced the pause to prevent “disorderly, inconsistent and inefficient outcomes” for consumers and knock-on effects on firms and the market.
Data from the watchdog found that 40 per cent of car finance agreements had DCAs, although Martin Lewis suggests that the total could be as much as 74 per cent.
Responding to the FCA delay, Stephen Haddrill, director general of the Finance and Leasing Association, stated that this was expected and is a sensible measure.
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Drivers could receive a £750million payout over the car finance issues
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He stated: “We need a solution that identifies and quickly resolves genuine complaints, while providing lenders the certainty and clarity to reject the vast number of speculative complaints made by claims management companies.
“We welcome the FCA’s comment that it is more likely now that they will intervene to deal with DCA complaints than when they started the review – such an intervention should remove the inconsistent outcomes we have seen in previous complaints cases and ensure market integrity.”