Are You Entitled to a Refund from your Car Finance Agreement?

A current inquiry being conducted by the Financial Conduct Authority (FCA) holds the potential to result in refunds for car finance customers. The FCA is presently examining ‘discretionary commission arrangements’ which occurred prior to the prohibition of this practice in January 2021. The prohibition was implemented to prevent car dealers and brokers from raising interest rates to earn extra commission from car finance deals. Customers who secured car finance agreements before the ban have subsequently lodged numerous grievances, prompting the FCA to initiate an investigation into historical motor finance commission arrangements and sales.

The investigation, anticipated to be concluded by September, has suspended an eight-week deadline for motor finance firms to address complaints. Drivers who have already filed a complaint now have an extended period to elevate their case to the Financial Ombudsman. Should the investigation conclude that commission arrangements were indeed problematic, the FCA has affirmed that a compensation mechanism will be established for affected customers.

In order to qualify for any potential refunds, drivers must have purchased their vehicle and arranged their finance before January 28, 2021. It has been estimated that 95% of car finance deals involved some form of commission model, with approximately 40% of them being ‘discretionary commission arrangements’. Money Saving Expert Martin Lewis has introduced a tool on his website to aid customers in navigating the investigation and drafting a complaint email if they acquired car finance before January 2021. The tool is intended to empower customers to lodge their own complaint without having to engage a claims management company.

The response to the reclaim tool has been significant, with over 262,500 complaint emails being dispatched within just one day of its launch. The upsurge in complaints indicates that numerous customers may be entitled to refunds. Therefore, it is advisable for car finance customers to stay abreast of the investigation and monitor its progress over the ensuing months.

Ultimately, the outcome of the investigation will establish whether car finance customers are due refunds, and the FCA is dedicated to ensuring that any owed compensation is disbursed judiciously. With the investigation still in progress, customers should remain vigilant and keep abreast of any developments that could impact their car finance agreements.