Martin Lewis has urged anyone who bought a car, motorbike or campervan between April 2007 and January 2021 to check if they are owed compensation as a result of ‘mis-sold’ car finance
Money-saving guru Martin Lewis has dropped a bombshell for anyone who purchased a car, motorbike or campervan between April 2007 and January 2021, claiming they could be in line for thousands in compensation. The 52-year-old highlighted that many consumers might have been duped after the Financial Conduct Authority (FCA) launched a probe into car financing to determine if customers were overcharged on loan interest.
Just last week, Martin also shed light on an October ‘landmark’ Court of Appeal ruling that he believes could revolutionise the process of claiming back money. Although this ruling wasn’t directly tied to the FCA, it pertains to ‘common law’, which Martin suggests could have a ‘seismic’ effect on DCAs – the now-outlawed ‘discretionary commission arrangements’.
Under these schemes, dealers hiked up interest rates to earn 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,” Martin penned in the MoneySavingExpert (MSE) 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 essence, Martin believes that this ruling could bolster the FCA’s position, even if it isn’t directly related.
The FCA’s next investigation update is due in May 2025, but vehicle owners can still lodge a claim today. To qualify, you must have purchased a vehicle between April 2007 and January 2021 – this includes cars, motorbikes or campervans.
However, business cars and static caravans are excluded – only those used for personal use and commuting. Claims can also be made on behalf of someone who has passed away, or for a vehicle that you no longer own.
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If you believe you meet these criteria, MSE encourages you to use its online tool that formally asks your finance firm whether a policy implemented used a DCA. If the answer is yes, it’ll then automatically log a formal complaint.
MSE has previously claimed that a whopping 74% of those who used their tool found out 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.
“We’re reviewing the issue to make sure that, if you’re owed compensation, you get it in the best way possible.”
