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Motorists who were mis-sold car loans are set to receive compensation after one lender confirmed it would not contest a ruling. Santander has now agreed to pay compensation for its share of the mis-sold deals as the bank confirmed on Saturday it would not "challenge" the decision.

Payouts are due on about 12.1 million mis-sold deals from a number of different lenders at an average of £829 each, the financial watchdog revealed in March when it unveiled plans for its redress scheme. The Financial Conduct Authority (FCA) expects the total amount of redress paid under its scheme to reach approximately £7.5 billion, based on around 75% of eligible consumers submitting a claim.

It anticipates that millions of claims will be settled this year, with the vast majority resolved by the end of 2027. A spokesperson for Santander said today: "We have decided not to challenge the schemes and will now focus on their implementation."

Lenders are able to begin making payments immediately, with those who have already lodged complaints likely to be paid first, the FCA confirmed at the end of last month. The majority of car finance deals covered involve so-called discretionary commission arrangements (DCAs), which were banned in 2021.

This relates to arrangements whereby brokers, including car dealers, were permitted to raise interest rates on car loans in order to earn higher commission. The FCA stated that this resulted in unfair treatment for customers who were not adequately informed about the arrangement and consequently lacked the opportunity to negotiate or seek a more competitive deal.

Those who were not made aware of an agreement involving substantial commission or a contractual tie to a firm are also entitled to compensation. The scheme covers agreements taken out between April 6 2007 and November 1 2024.

Upon reaching its payout decision, Santander stated: "This was a finely balanced judgment reflecting our primary desire to bring greater certainty to our customers, shareholders and the wider motor finance sector, factors which outweighed our disagreement with elements of the proposed schemes.

"We will continue to work constructively with regulators and policymakers to seek to improve the competitiveness of the UK in the interests of all our customers, taxpayers and investors."

The FCA revised the long-awaited redress scheme's structure after receiving in excess of 1,000 responses to a consultation. These came from a variety of different parties, including motor finance lenders, consumer groups, carmakers and industry bodies. The original proposals attracted criticism from both camps.

Lenders and car finance firms expressed concern that compensation levels were excessive and failed to accurately represent customers' actual losses, while consumer organisations and certain MPs contended that motorists would be inadequately compensated under the scheme.

The consultation responses have led to stricter eligibility requirements, meaning only those genuinely treated unfairly will receive compensation, according to the FCA. It anticipates roughly a third of cases will be subject to caps to prevent consumers being overcompensated.