IN GEAR
Martin Lewis responds to major update on car finance compensation claims – and explains move to make ASAP
The man behind Money Saving Expert gave motorists his two cents
MARTIN Lewis has responded to a major update on car finance mis-selling which could mean millions fo drivers area owed compensation.
Earlier today, the Financial Conduct Authority's (FCA) revealed that customers of car finance will have longer to make a claim if they think they are affected.
2
The generous move comes shortly after the regulator's investigation into sales practices which may have seen millions overpay.
The Money Saving Expert founder took to his X account to speak on the update - and urged anyone affected to make a claim "ASAP"
He said: "The FCA has just announced the planned decision on whether firms systemically missold car finance due to Discretionary Commission Arrangements [DCA] will be moved from Sept 2024 to May 2025.
"More so it has delayed when firms must deal with complaints even further, to Dec 2025.
READ MORE in money
"Its announcement indicates there's a chance that in May it will launch a consultation on a redress scheme (and the Court will have decided on a key case by then), and the move to Dec is so it'd be able to finish that consultation before firms have to put it in place."
The regulator has been looking into thousands of allegedly dodgy deals handed out before January 28, 2021.
After this date, city watchdog the FCA banned lenders from using "discretionary commission arrangements" (DCAs).
But anyone who took out a vehicle on finance before this date could have been unfairly paying more than they should have.
Most read in Money
The money expert acknowledged: "Clearly the delay is disappointing for those awaiting a decision, including the 2m who've submitted complaints via t
"Yet it does signal it's still looking favourably on ruling it is mis-selling and a payout is due - even though the finance firms have been pushing back hard both publicly and through the courts."
My car A/C tips will keep you cool without wasting time and gas - a common mistake can be fixed with better parking
He finished off his tweet by issuing an urgent warning to his followers.
"Most important thing people can do it log their complaint asap, so that if there is a time bar, hopefully there's less chance of it being ruled out of time."
The FCA's probe was set to conclude in September of this year, but the watchdog has now announced that it won't finalise its report until May 2025.
When they started investigating, they suspended the need for lenders to have to issue a final response to a complaint within eight weeks until after its conclusions were released.
What is the FCA investigating and who is eligible for compensation?
What is being investigated?
The FCA announced in January that it would investigate allegations of "widespread misconduct" related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers - usually the finance arm of a dealership.
These brokers earn money in the form of commission - a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
Given the setback, this means that lenders will now not have to issue a final response to complaints until December 4 2025 "at the earliest".
According to the FCA, the delay has been in large part due to the fact that lenders have "struggled to supply the data we need within the requested time".
This, combined with a pending court case reviewing a particular complaint, has left investigators unable to complete their work by the initial deadline.
But as Martin pointed out, the silver lining is that motorists have more time to submit complaints, with the deadline to appeal your lender's response through the Financial Ombudsman set back.
Brits will now be able to take their case to the Ombudsman until July 29, 2026 or up to 15 months after their final response is dated, whichever comes later.
The FCA stresses that initial complaints will still need to be made within six years of the finance deal occurring or within three years of when you would reasonably become aware that you had grounds to complain.
Martin has a on his website helping consumers know if they've been shafted by no-win, no-fee claims-chasing firms who promise to claw back cash for customers, but take a hefty chunk of the money themselves.
What is the car finance scandal?
Before January 2021, some car finance lenders allowed brokers who arranged loans to set, or increase, interest rates for customers.
It was known as a “discretionary commission arrangement”, and the higher they set your interest rate the more commission they earned.
Customers did not know this was in place or that they were paying over the odds for car insurance.
The practice was banned in January 2021 by the Financial Conduct Authority.
Since then, complaints have rocketed, with more than 17,000 filed to the Financial Ombudsman Service.
The FCA told car finance firms to review their practices and fix any wrongdoing — but this hasn’t happened.
Around 30,000 motor finance complaints were dealt with by major lenders between January 2019 and the end of June 2023.
How do I claim?
It's not clear at this stage whether customer complaints will be dealt with on an individual basis or on a larger scale as the FCA's investigation is yet to conclude.
Financing firms don't have to deal with complaints until March 2025, when the FCA is scheduled to report the findings of its investigation.
But, you should start the complaint procedure now in case a future time limit is put in place.
You can either use the MSE tool, which helps you draft a complaint email.
Or, you could complain to your car financing company direct.
In the complaint, you should ask whether you were overcharged due to your broker getting paid commission and ask the company to correct this if that is what happened.
READ MORE SUN STORIES
If you're not satisfied with the company's response, you can take your complaint to the Financial Ombudsman Service (FOS) for free.
You don't need to use a claims company throughout the process as these firms usually take a percentage cut of any payout you receive.
2
Topics