Could You be Owed Money from Your Car Finance Agreement?

The Financial Conduct Authority (FCA) has commenced an investigation into car finance agreements, specifically focusing on ‘discretionary commission arrangements’ and their possible impact on motorists. This action follows the FCA’s prohibition of these arrangements in January 2021, citing a surge in customer complaints regarding excessive charges on their car loans. Consequently, the FCA has received over 10,000 complaints from individuals who allege that they were overcharged for their car finance.

This inquiry encompasses both Personal Contract Purchases and hire purchases, through which customers make monthly payments towards their vehicle loans. The FCA anticipates concluding the investigation by September of this year, although there is the potential for an extension. Consequently, the deadline for motor finance firms to respond to complaints has been suspended, allowing companies to await the outcome of the FCA probe before addressing complaints.

Should the investigation uncover any malpractice in commission arrangements, the FCA has affirmed its intention to establish a compensation system for affected individuals. However, the total amount of compensation remains undisclosed at present. Drivers who arranged vehicle purchase and finance prior to January 28, 2021, may be entitled to compensation if the investigation rules in their favour. Data from the FCA suggests that around 95% of car finance contracts featured some form of commission model, with approximately 40% involving a ‘discretionary commission arrangement’.

Money Saving Expert Martin Lewis has extended support to consumers through his website by providing a tool to assist individuals in navigating the investigation and drafting email inquiries regarding their car finance agreements. This tool is designed to help individuals initiate their own complaint letter without the involvement of third-party claims management companies, which may seek a portion of any potential compensation.

The response to this tool has been substantial, with over a quarter of a million complaint emails sent within a day of the tool’s launch. Mr. Lewis has expressed his amazement at the overwhelming response, noting that the numbers far surpass those witnessed during the final days of the PPI (payment protection insurance) deadline.

In summary, individuals with car finance agreements predating 2021 should monitor the progress of the investigation and potential outcomes in the forthcoming months. If you suspect that you have been affected by these commission arrangements, utilizing support tools such as those provided by Martin Lewis can facilitate your navigation of the situation and enhance comprehension of your options for redress.