Millions of drivers could be owed compensation for unaffordable and expensive car finance deals – here’s how to claim
Half a million people are being stung by £1,100 in extra charges
MILLIONS of motorists could be owed compensation for car finance deals that are unaffordable or come with high commission rates.
A few weeks ago, an investigation by the city watchdog found that half a million people with car finance deals are being stung by £1,100 in extra charges by firms trying to make commission.
This report could eventually enable customers to claim refunds - similar to the how the PPI mis-selling scandal has hit banks with huge compensation bills, according to consumer rights experts.
The Financial Conduct Authority (FCA) warned that 560,000 customers could be paying a combined £300million more in interest - or 50 per cent more than they need to.
Its sample size was based on 60 per cent of the loans market, which means the issue is likely to be even bigger.
Even worse, many firms are so keen to sign PCPs, or personal contract plans, that buyers are not given enough time to properly understand the full details of their contracts.
As a result, it's expected that millions of Brits could be due compensation.
The FCA declined to comment when contacted by The Sun about whether firms should offer compensation and the comparisons to the PPI mis-selling scandal.
"It's not going to cost you anything, and instead you can get ready and be fully prepared when there's more progress on the FCA process," Lam said.
You should also try and get a copy of the agreed commission arrangements for the car finance you took out.
If you're lucky, the arrangements will be on documents where your personal data also can be found, meaning the firms are pretty much required to hand it over, Lam added.
Once you have all the details, consumers could try and make a complaint to the lender about unreasonable fees.
Keep in mind you'll have a stronger case if you can give examples of other deals that you could've been offered at the time.
Another option is to wait until the FCA takes action, which is likely, according to Lam, but not certain.
The car loan deals in the FCA's report can be compared to a PPI court case from last year, which meant that a couple who weren't made aware of the excessive rate of commission paid to the lender was fully compensated.
The ruling went further than the FCA rules at the time, and stated that if over 50 per cent of your PPI costs were commission and the lender didn't declare it, you're due back the difference.
- A refund of the interest on the finance. If you are still repaying the loan, you'll have the interest removed from the balance, so you only repay what you borrowed
- For the remaining balance to be repaid at an affordable rate
- For any negative marks to be removed from your credit record
As always, there's no guarantee you'll be successful.
The lender may reject your claim, in which case you can then take it to the Financial Ombudsman.
Keep in mind this process can take months, and during this period, you'll have to keep up with loan repayments, or your car may be taken from you.
Research published by car repair firm Kwik Fit has found that Brits are paying £1billion every month on car finance – and the motors cost 47 per cent more than they can afford to buy.
Here's how to get the best car finance deal as costs rise by 50 PER CENT in three years.
Plus, we explain what hire purchase, 0 per cent finance, PCP and personal leasing are.
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