A MAJOR update to the car fiance compensation scandal that could see drivers owed £1,000's has been revealed.
The Financial Conduct Authority (FCA) began an investigation earlier this year into whether motorists were unknowingly overcharged when they took out car loans.
But the financial watchdog said this morning it wants the consultation to be extended to give lenders more time to respond to complaints.
Nikhil Rathi, chief executive of the FCA said that this is to "make sure that consumers who are owed money get it in an orderly way".
The authority said that lenders should be given until May 31 2025 to give final responses to complaints.
The ongoing investigation focuses on past practices where banks allowed car dealerships and brokers to set their own interest rates on loans.
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Under this discretionary commission arrangement (DCA), the higher the interest rate charged, the more commission the dealer or broker earned.
However, many customers were unaware of this practice.
As a result, people who financed the purchase of a car, motorbike, or van before January 28, 2021 (when DCA was banned), may be owed significant sums of money.
The authority said lenders will need to use the additional time provided to ensure they have the "resources to investigate and issue final responses to complaints at the end of the extension".
It comes as a number of lenders have been gearing up to hand out thosuands because of the findings.
Just yesterday, Santander said it had allocated £295million to cover potential payouts for those who were missold car finance.
Llyods Banking Group has also set aside £450million to cover the cost of fines.