Car Finance Claims
Like high-cost lenders, many companies offering car finance have been guilty of irresponsible lending. If your car finance loan was unaffordable, you could be due a refund. On top of this, there has been a mis-selling scandal due to hidden commissions.
In 2021, the Financial Conduct Authority (FCA) banned Discretionary Commission Arrangements (DCAs), where Lenders systematically incentivised brokers and car dealers to charge their customers higher interest rates so they could receive higher commissions themselves. Brokers profited by giving the customer a worse deal. It is estimated that 40% of all car financing agreements include a discretionary commission arrangement. This would mean billions of redress would be owed to customers who claim.
On 25th October 2024 a high court judgement, it was decided that any hidden commissions, even if they were a fixed fee, have to be clearly disclosed. This opens up claims against many more lenders.
The FCA investigation into Discretionary Commission Arrangements discovered widespread evidence of mis-selling on all vehicle financing options such as personal contract purchase (PCP), hire purchase (HP), Contract hire or a car loan. PCP claims tend to be the most valuable, as capital is generally paid back more slowly, so more interest accrues.
The FCA estimated that hundreds of thousands of motorists might have been mis-sold car finance packages. In some cases, customers are being overcharged by over £1,000 in interest for the dealership to obtain a higher commission pay-out. As one car dealer openly admits in a recent article, “frankly, we were getting away with murder. We weren’t treating customers fairly and were, in effect, charging them to earn us money.”
Reports have shown that the car finance industry is rife with these secret payments and hidden commissions, meaning you could have been mis-sold your car finance deal. The FCA estimates this could have cost consumers £300 million annually.
The FCA is now looking into whether a compensation plan is necessary for addressing alleged large-scale mis-selling in the motor finance sector. This followed the Financial Ombudsman Service's recent ruling in favour of complainants for hidden commissions in car finance.
You need to act quickly as there are statutory deadlines, known as limitation periods, that apply to mis-selling claims. Start your claim today for professionals to guide you through the process.
Martin Lewis
“£13 billion could be paid out over car mis-selling.” “This is enormous... we're talking about systematic, mass scale mis-selling” [1]
BBC
"Motorists who bought cars on finance could share in billions" [2]
MoneySavingExpert
“This could lead to billions of pounds of overcharged interest paid back to millions of people.” [3]
Was My Car Finance Mis-sold?
There are many reasons why a loan has been mis sold and a borrower may be eligible for a refund. This includes irresponsible lending. Irresponsible lending means the person borrowing the money doesn’t have enough income to pay back the loan as well as their other basic living expenses and pre-existing loans. This can often be the case with subprime lenders like Moneybarn. In these cases, the claimant can receive a refund on all interest and fees they have paid on their loan.
If any of the below statements describe your experience with Car Finance, including personal contract purchase (PCP) contracts, you could be eligible to claim compensation.
The loan was unaffordable or the lender did not perform proper affordable ability checks - A Daily Mail investigation has found that people on low incomes or unemployed are being offered PCP deals
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The car salesperson did not explain they would receive a commission (Hidden Commissions) on the sale of the car
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The lender/bank did not fully explain the commission
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The salesperson skipped through the car finance agreement Terms & Conditions
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You felt pressured into the finance deal and was not given a range of options including explaining all of the differences in each type of product
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The salesperson did not make it clear who was financially responsible for the repairs to the vehicle
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The salesperson did not offer the best interest rate available
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The salesperson did not present, with complete transparency, the interest rates charged for all loan options and how they may differ
Don’t worry if you can’t find the agreement or remember who the lender or dealership was. You just need the name of the company you made the payments to. You should be able to find this information on your old bank statements.
You need to act quickly as there are statutory deadlines, known as limitation periods, that apply to mis-selling claims. Start your claim today for professionals to guide you through the process.
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You do not need to use a claims management company to make your complaint to your lender. If your complaint is not successful you can refer it to the Financial Ombudsman Service yourself for free.
FAQs
How long do Car Finance claims take?
The rules state that a lender has 8 weeks to reply to a complaint, however, sometimes they go over this deadline. If the lender concedes they were at fault, they will pay out shortly after. If the complaint needs to go to the Financial Ombudsman because the car finance lender is disputing it, the case could take anywhere between 12 to 18 months to conclude. Some people are lucky and get a claim accepted, and their refund paid, after only a couple of months. Others take over a year.
Lenders currently have an extension for hidden commissions claims, granted by the FCA, so these may take longer than usual.
How much could I get refunded from a car finance claim?
The compensation you may be entitled to depends on key factors, including the loan amount, interest rate, finance agreement date, and loan duration. The Financial Conduct Authority (FCA) highlighted in their report, "Our Work on Motor Finance – Final Findings" (March 2019), that a typical motor finance agreement of £10,000 under a Discretionary Commission Arrangement (DCA) could lead to consumers being overcharged by as much as £1,100 over a four-year period. As most people will have multiple car finance agreements, the average refund per claimant would likely be thousands.
How many people were affected by Hidden Commissions?
In terms of discretionary commission arrangements (DCA's) the FCA stated “On average, between 2007 and 2021, approximately three-quarters of all car finance had a DCA”.
In terms of hidden commissions in general, this would affect many more borrowers.
How do I know if I can claim?
Mis-selling often occurs when details of the agreement aren’t clearly explained or proper affordability checks aren’t conducted. If either applies to you, you can file a complaint. Additionally, issues with the vehicle itself, while not a form of mis-selling, can also warrant a complaint. Common mis-selling scenarios include unclear costs or contract terms, lack of affordability checks, and unexpected issues like hidden fees or misleading ownership terms. Whether your agreement is ongoing or paid off, you can still claim. To find out if you can claim, click "Check Now" below.
Why Use The Claims Guide For My Claim?
Help Maximising Claims - We will go through your previous borrowing and help you claim from an extensive list of lenders. Other claims companies will more likely turn you away if you are not claiming against one of their few approved lenders.
We Make It Easy - Claiming a refund can be a daunting task. We make it easy and ensure everything you need is included so you don't have to spend much time on it.
Professional - Each claim is different and specific circumstances that are relevant to the claim should be explained by a professional. The Financial Ombudsman has previously been unable to progress some complaints that involved a “template” or “standard letter”.
How much will I receive if my Car Finance Claim is successful?
Compensation for a mis-sold car finance claim is generally aimed at covering the financial disadvantage caused by the mis-selling, particularly in cases involving Discretionary Commission Arrangements (DCAs). Compensation for loans with a DCA arrangement is based on the extra you paid compared to if you were given a more competitive rate, plus 8% statutory interest. The FCA estimates this will average over £1.1k per claim. For more information and an estimate of the value of your claim, click here.
How much will I receive if my Unaffordable Lending Claim is successful?
If you successfully claim a refund from a lender, you can claim back the interest and charges on your loans, plus 8% statutory interest. For more information on how this is calculated click here.
How much will I receive if my Hidden Commissions Claim is successful?
If you successfully claim a refund for hidden commissions, you can generally claim back the commission paid to the broker, plus, typically, 8% statutory interest. In some more serious cases, you may receive more. These circumstances are explained here.
What Information Do I Need to Provide?
You just need to provide the name of your lender and your personal details including the address that you lived at when registering with them. Once you have given these we can obtain details of any loans where a refund may be due.
How much will I be charged?
Claiming through us always works on a no win no fee basis, meaning you won't pay a thing unless you win compensation. You will have the right to cancel the agreement within 14 days with no penalty. If you cancel after 14 days you may be charged for work done up until the time of cancellation. We use multiple partners to ensure we are able to offer claims against all lenders, from whom we receive payments. The exact fee structure will depend on which lender you are claiming against, as this decides which of our partners is most suitable for your claim. A breakdown of our fee structure can be seen here. The fees for Diesel Emissions Claims are calculated differently due to it being a group action lawsuit.
How Do I Submit My Claim?
Simply complete our online application form by clicking on the "Get Started" button. This is the first stage of your complaint to the payday lender where you could receive compensation. For more information on the process please click here.