Core Viewpoint - The proposed £11bn car finance compensation scheme by the Financial Conduct Authority (FCA) poses a risk of deterring foreign investment in the UK, according to Lloyds Bank CEO Charlie Nunn [1][3]. Group 1: Impact on Investment - The car finance compensation scheme could become an "investability issue" for the UK, affecting both global companies and investors in financial services [3]. - Nunn highlighted that the scheme might undermine over 20 years of profitability in the car finance sector [2]. - Concerns were raised that the payouts would primarily benefit litigation funds based in offshore locations, rather than the affected drivers [3]. Group 2: Economic Implications - Nunn warned that the car finance scandal could have broader economic repercussions, potentially deterring investment across the UK [4]. - The FCA's revised plans for the compensation scheme are estimated to cost the industry significantly less than previous estimates, which could still impact lenders' willingness to issue new loans [5][6]. - The extended consultation period for the FCA's plans allows banks to challenge the compensation scheme, reflecting the industry's pushback against what they consider excessive payouts [7]. Group 3: Context of the Issue - The Supreme Court ruling in August found that some drivers were mis-sold motor finance loans, which has led to the current compensation discussions [8]. - The planned redress scheme is expected to allow approximately 14.2 million drivers to receive payouts averaging around £700 each [7].

Core Viewpoint - The Financial Conduct Authority (FCA) is investigating around 30 million car finance loans for potential mis-selling, with a compensation scheme expected to launch in 2026 [1][2]. Group 1: Investigation and Compensation Scheme - The FCA is examining car finance agreements taken out between 2007 and 2020 to determine if they were mis-sold and qualify for compensation [1][2]. - Approximately 14 million of the 30 million agreements are likely to be eligible for the compensation scheme [2]. - The FCA's redress scheme is based on a Supreme Court ruling that found certain motor finance agreements unlawful, particularly regarding undisclosed commissions paid to car dealers [4]. Group 2: Nature of Mis-selling - The investigation includes discretionary commission agreements (DCA), which are bonuses paid to car dealers for increasing loan interest rates, and which were banned in 2021 [3]. - A significant proportion of these agreements are believed to have breached disclosure laws, leading to unfair relationships between lenders and consumers [3][5]. - The FCA has indicated that many consumers were not adequately informed about the terms of their loans, potentially resulting in unfair interest rates [5]. Group 3: Financial Implications - The FCA estimates that most individuals may receive less than £950 in compensation, with the total cost of the compensation scheme projected to be between £9 billion and £18 billion [6].