A major bank will be paying customers £829 compensation. Santanderhas confirmed it will participate in the Financial Conduct Authority's (FCA) redress scheme for mis-sold motor finance. The bank's decision follows the FCA's March unveiling of a broad compensationframework to address approximately 12.1 million mis-sold deals issued by various lenders.

With an estimated £7.5 billion in total redress expected to be paid out, the move signals a major shift toward resolution for millions of consumers who were locked into unfavourable lending arrangements. The redress program covers motor finance agreements taken out between April 6, 2007, and November 1, 2024. The vast majority of these cases involve Discretionary Commission Arrangements (DCAs) - a practice banned by the FCA in 2021.

Under these arrangements, brokers and car dealers were permitted to inflate loaninterest rates, thereby directly increasing their own commissions. The FCA found that this practice created systemic unfairness, as many customers were never informed of the arrangement and were subsequently denied the opportunity to negotiate or access more competitive market rates. The average payout is expected to be approximately £829 per eligible deal.

Payments are currently beginning, with the FCA confirming that customers who have already filed complaints are likely to be prioritised. The majority of claims are expected to be settled by the end of 2027.

The finalised scheme follows an extensive consultation period that yielded more than 1,000 responses from consumer groups, MPs, lenders, and industry bodies.

Initial proposals have been met with resistance from both sides, with consumer advocates arguing the payouts were insufficient. Lenders, on the other hand, have claimed the financial burden was excessive and not reflective of actual consumer losses.

In response, the FCA has tightened eligibility criteria to ensure compensation is focused solely on those treated unfairly. Additionally, the regulator expects roughly one-third of cases to be subject to a payment cap to prevent overcompensation.

In a statement released on Saturday, a spokesperson for Santander explained that the decision to opt into the scheme was a strategic move to provide clarity for stakeholders.

"We have decided not to challenge the schemes and will now focus on their implementation," the spokesperson said. "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."

The lender added that it intends to continue working with regulators and policymakers to enhance the competitiveness of the UK motor finance sector in the interest of investors and consumers alike.