Motorists could be owed serious cash after a court ruling deemed hidden commission payments to car dealers unlawful. But the car finance sector is fighting back on the verdict
Motorists in the UK are being urged to make a claim as they could be owed thousands of pounds.
A judgement from the Court of Appeal last year left those in the motoring finance sector stunned as hidden commission payments to dealers were deemed unlawful. Now companies who claim they did nothing wrong are eagerly awaiting clarity from the Supreme Court, but regardless of the outcome, drivers could still cash in by making a claim now. Experts are predicting the level of compensation could rival that of PPI.
Car finance is the second biggest lender to consumers in the UK after mortgages. A large amount of new and second-hand cars are bought on finance agreements, where drivers put down a deposit, borrow the rest on a loan and drive away in their new motor. However it’s emerged that dealers were signing customers up to the finance deals and behind the scenes were paid a commission by the lenders.
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After a number of cases were brought to the attention of the Court of Appeal over these hidden commissions, three judges unanimously agreed that it would be illegal for the lender to pay any commission to the dealer without the informed consent of the buyer. This means customers should be told how much commission would be paid and they would also have to agree to it – without the details being hidden in the loans terms and conditions.
Companies involved claim they are not in the wrong as they were following the law as they understood it. They are awaiting clarity from the Supreme Court judges as well as lenders. Major banks have already set aside huge amounts of money as millions of people who bought cars on finance could make a claim, the BBC reports.
Now the Financial Conduct Authority (FCA) are urging motorists to make a claim if they feel they were vitcims of mis-selling. Under the FCA’s plans, finance providers will have until December to consider and respond to complaints – but those cases will be hugely dependent on the judgement of the Supreme Court judges.
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Dame Meg Hillier, chair of the influential Treasury Committee of MPs, has called it “one unholy mess” due to the dealers and lenders may not having been transparent to their customers and hiding their commission. But if even if the judges agree with the appeal from car finance providers, lenders are still facing a hefty compensation bill. That is because the FCA has already banned discretionary commission arrangements (DCAs), when the higher the interest rate on the loan, the higher the commission that was paid to dealers.
However the car finance sector has insisted it has complied with the law and appealed the ruling. Adrian Dally, from the Finance and Leasing Association, the trade body for the sector, said: “We hope that the Supreme Court settles the issue once and for all, confirms that the industry did nothing wrong historically, and clarifies what the rules are permanently for the future.”
For more information on claims, visit the FCA’s website.
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