DRIVERS may be in line for billions of pounds in payouts as a probe into car finance is launched.
The Financial Conduct Authority (FCA) launched an investigation into whether customers were overcharged on historical vehicle finance loans.
GettyThe practice at the centre of the probe allowed brokers to earn commission by pumping up the cost of finance deal[/caption]
Car Finance Discretionary Commission saw brokers who arranged car financing earn commission on the interest rates that they set for customers.
Banned in 2021, it gave dealers an incentive to increase how much customers had to pay, the Financial Conduct Authority says.
Millions who bought a car, van or motorbike on finance before January 28, 2021, could be owed billions of pounds in total.
Around £450 million has been set aside by Lloyds for customers who were charged too much for loan cars and want compensation.
Lloyds is seen as the most exposed of the major banks following the launch of the probe.
That’s because they own Black Horse, one of the UK’s largest motor finance providers.
The bank denies any wrongdoing. The compensation paid could be higher or lower than the funds it set aside.
Lloyds chief executive Charlie Nunn said: “The extent of any misconduct or loss on behalf of customers, if any, remains very unclear so we welcome the FCA’s announcement a few weeks ago to look into this to provide clarity for customers and the industry.”
What is the Car Finance Discretionary Commission Scandal?
The Car Finance Discretionary Commission Scandal affects those who bought a car, motorbike or van on finance before January 28, 2021.
After this date, city watchdog the FCA banned lenders from using “discretionary commission arrangements” (DCAs).
This meant brokers could no longer increase interest rates on car finance loans, which in turn saw their commission bumped up.
Anyone who took out a vehicle on finance before this date could have been unfairly paying more than they should have.
The FCA has now launched an investigation to see how many people have been impacted.
Consumer expert Martyn James previously told The Sun “thousands upon thousands” of people may have been overcharged.
MSE’s website also has a useful checklist on who might be in line for money back.
How do I claim?
It’s not clear at this stage whether customer complaints will be dealt with on an individual basis or on a larger scale as the FCA’s investigation is yet to conclude.
Financing firms don’t have to deal with complaints until September 25, when the FCA is scheduled to report the findings of its investigation.
But, you should start the complaint procedure now in case a future time limit is put in place.
You can either use the MSE tool, which helps you draft a complaint email.
Or, you could complain to your car financing company direct.
In the complaint, you should ask whether you were overcharged due to your broker getting paid commission and ask the company to correct this if that is what happened.
If you’re not satisfied with the company’s response, you can take your complaint to the Financial Ombudsman Service (FOS) for free.
You don’t need to use a claims company throughout the process as these firms usually take a percentage cut of any payout you receive.
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