Martin Lewis has explained that anyone who bought a car on finance between 2007 and 2021 could be eligible for an average compensation of £1,100 when an investigation by the FCA concludes in May 2025
Drivers who have bought a car on finance might be owed some serious compensation, Martin Lewis – the Money Saving Expert – has revealed. The expert explained that drivers who used finance deals to purchase their cars between the years of 2007 and 2021 could be in line for an average payday of £1,100 when an investigation currently being conducted by the Financial Conduct Authority (FCA) concludes next May.
The FCA is currently investigating a practice called Discretionary Commission Arrangments (DCA) which saw lenders allow those who arranged car loans – including car dealers – to adjust their customers’ interest rates. This meant that the higher the interest rate given to a customer, the more commission whoever was arranging the loan would receive – something that was banned in 2021.
Customers often had no idea about this practice, and if the FCA rules in the favour of consumers in May when their investigation draws to a close, anyone who bought any kind of personal motor vehicle on a hire purchasing deal or a personal contract plan might be eligible for compensation.
“It was about discretionary commission arrangements. That’s where lenders said to car dealers and brokers ‘You can make up the interest rate and if you push it higher, we will give you more commission’,” the expert explained, reports Bristol Live. “And this was done without telling consumers. So it was hidden. They didn’t know about it. And up to 40 percent of car finance deals over the period we’re talking about had this discretionary commission arrangement. So are you one who may be owed thousands back?
Whilst it still isn’t “certain” if drivers will be awarded this financial compensation a recent “seismic” ruling by the Court of Appeal – which found that customer’s had to have full consent for car companies to receive compensation – could impact the outcome of the FCA’s investigation.
Martin explained. “To get fully informed consent, the customer must know all the facts, including the amount of the commission, which was never told. That is a radical clear viewpoint. It increases the likelihood of car finance mis-selling compensation via the FCA next May because the FCA had delayed due to these court cases to see what was said.
“And so now they’ve ruled in a pro-consumer way. It strengthens the regulator’s hand that if it rules in a pro-consumer way, then it is less likely to be successfully challenged in court under a judicial review because the courts have already given a view subject to it going to the court.”
If the FCA finds in favour of drivers next year and you bought a motor vehicle for personal use on one of these finance deals, you wouldn’t automatically receive compensation – and would have to actively make a complaint to see if you are eligible, something that Martin Lewis advises you do now ahead of the investigation concluding. Because customers were not informed about the practice of DCA, there wouldn’t be any sign of it in the paperwork of the finance deal, so if you believe you may be affected by this practice you need to launch a complaint.
“So you have to put in a request and say ‘Did I have a DCA? And if I did, I want to put in a formal complaint.’ Now, while nothing will happen until May when the FCA reports you should log a complaint as soon as possible in case there’s a time bar later,” the expert explained.
“So the earlier you get your complaint in the better in case it stops you being time-barred because we’ve got so much uncertainty.”
The expert advised against using a no-win-no-fee lawyer to try and make this complaint because there are free tools for consumers to use online, including one offered by his Money Saving Expert website, through which 2.4 million people have already complained.
Do you have a story to tell? Email: emma.mackenzie@reachplc.com
