Calculating Your Potential Refund (A Deep Dive into the Math)
How is compensation actually calculated? We explain the formula used to determine how much you are owed.
Key Takeaways & Core Claims
- How is compensation actually calculated? We explain the formula used to determine how much you are owed.
- The FCA motor finance redress scheme applies to agreements taken out between April 6, 2007, and November 1, 2024.
- Generating a formal complaint letter directly to your lender secures your right to a refund and keeps 100% of the payout.
While every claim is unique, the methodology for calculating refunds is becoming standardised. Here is how the numbers work.
The Formula
Refund = (Interest Paid - Interest That Should Have Been Paid) + 8% Statutory Interest
Step 1 - Determine the "Fair" Rate
The lender must disclose what the "Base Rate" was at the time. Let's say you paid 9%, but the base rate was 4%. The "unfair" portion is the 5% difference.
Step 2 - Recalculate the Loan
They run a simulation of your loan as if it had been at 4%.
- At 9%, you might have paid £2,000 in total interest.
- At 4%, you would have paid £900.
- The difference is £1,100.
Step 3 - Add Statutory Interest
You were deprived of that £1,100 for years. The courts award 8% simple interest per year on that money as compensation.
If the loan was 4 years ago, that could add another £300-£400 to your total.
Variables
- Loan Size: Larger loans generate larger refunds.
- Duration: Longer loans accrue more compound interest.
- Date: Older loans have accrued more statutory interest.
Simeon Onaola
Founder, consumer rights advocate, and motor finance specialist. Dedicated to helping UK motorists challenge undisclosed discretionary commission arrangements and claim their rightful refunds.
Disclaimer: This content is for informational purposes only and does not constitute legal or financial advice.
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