Santander has urged Chancellor Rachel Reeves to intervene in the Financial Conduct Authority’s (FCA) £11bn car finance compensation scheme, warning it could harm the wider economy and threaten jobs across the UK automotive sector.
The Spanish-owned bank has called for the government to narrow the scope of the redress programme, arguing that its current design risks “unintended consequences” for both lenders and consumers.
The plea came after Santander delayed the publication of its third-quarter results, citing uncertainty surrounding the FCA’s proposed scheme. The regulator announced plans last month to compensate millions of motorists who were mis-sold car finance deals under hidden commission arrangements between car dealerships and lenders.
‘Material changes’ needed
Santander’s UK chief executive, Mike Regnier, said the government must consider revising the scheme to avoid damaging the car finance market.
“We believe the level of concern in the industry is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK Government,” he said.
“Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy.”
Mr Regnier also warned that the compensation programme could restrict access to credit, making it harder for consumers to secure affordable car loans.
Industry backlash grows
The FCA estimates that up to 14.2 million drivers could be eligible for compensation, with average payouts of around £700 per person. The scheme covers about 44% of all car finance agreements made between 2007 and 2024.
The regulator said the programme would address cases where customers were charged inflated interest rates to cover “unreasonable” commissions paid to salespeople — sometimes as high as 55% of the loan value.
Santander had previously set aside £295m to cover potential costs, but has argued the FCA’s proposals go beyond what was required by a Supreme Court ruling in August, which found that customers had been treated unfairly.
Other major lenders have also voiced opposition. Lloyds Bank has warned the scheme is “too broad” and has not ruled out legal action. It has set aside an additional £800m, bringing its total provisions to £1.95bn. Barclays has raised its reserves to £325m, while Close Brothers increased its provisions from £165m to £300m.
FCA defends its plans
The Financial Conduct Authority has stood by its approach, insisting that the scheme is the most effective way to compensate affected drivers and bring closure to the long-running issue.
An FCA spokesperson said:
“We’ve set out in detail the thinking behind our proposals and welcome considered feedback. We believe a compensation scheme is the best way to settle, for both lenders and consumers, liabilities that exist no matter what. Alternatives would cost more and take longer.”
The regulator added that it was vital to “draw a line under the issue” to ensure the motor finance market can “continue to serve millions of families every year.”
The FCA is currently holding a consultation period before the scheme’s official launch, expected in early 2026.
