Martin Lewis has issued a fresh warning to the many people who bought purchased cars, motorbikes, or campervans between April 2007 and January 2021, as they might be entitled to thousands of pounds. The Money Saving Expert founder is reminding people of a widespread “mis-selling” of car finance.
His alert comes just months after the Financial Conduct Authority (FCA) kicked off an investigation into car financing, as it seeks to understand whether customers have been charged too much interest on loans. Last week, Martin also explained that a “landmark” Court of Appeal ruling took place in October, which could potentially simplify the process of claiming back compensation.
This ruling, Mr Lewis notes, although not directly linked to the FCA, is based on “common law” and could represent a “seismic” shift affecting Discretionary Commission Arrangements (DCAs).
These are the now-banned car financing agreements that saw dealers ramp up interest rates to get more commission. Usually, customers weren’t informed of this and believed the car finance was offered at a fix price, making it an especially “unfair practice”.
“A shock exploded through the car finance world on Friday [October 25], as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms,” Lewis wrote in his newsletter.
“That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it..The verdict was unambiguous and said a car sales firm couldn’t lawfully receive commission from a finance firm unless it had the customer’s ‘fully informed consent’.”
In a nutshell, Martin therefore believes that the ruling may strengthen the FCA’s hand, even if it isn’t directly linked. The FCA’s next investigation update is set to take place in May 2025, but vehicle owners can still make a claim today.
To be eligible, you must have bought a vehicle within the14-yearperiod between April 2007 and January 2021 – this includes cars, motorbikes or campervans. However, it does not include business cars and static caravans – only those used for personal use and commutes.
Claims can be made on behalf of someone who’s passed away too, or for a vehicle that’s no longer in your ownership. If you think you tick these boxes, MSE then encourages you to use its online tool that formally asks your finance firm whether a policy implemented used a DCA. Providing the answer is yes, it’ll then automatically log a formal complaint.
MSE previously claimed that 74% of those who used this tool discovered they had a DCA. However, it’s critical to be quick about this as MSE speculates that a ‘time bar’ will be introduced eventually.
This may limit people from claiming back after a certain period of time. In an explanation of the investigation, the FCA also adds: “Before January 2021, some lenders allowed brokers (the person that arranges your loan, for example, your car dealer) to adjust the interest rates they offered customers for car finance.
“The higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement (DCA). And it may have been applied to your loan without you knowing.
“DCAs created an incentive for brokers to increase how much people were charged for their car loan. We banned this practice in 2021. But there have since been a high number of complaints from customers about how much they were charged before the ban. Providers are rejecting most of these complaints, because they believe they haven’t acted unfairly and haven’t caused customers to lose out.