MARTIN Lewis has been left “staggered” by the number of car finance complaints he has received, as Brits could be owed millions in compensation over dodgy deals.
The personal finance expert’s site has seen over a million people submit a claim in just over a month.
ITVMartin Lewis has been left ‘staggered’ after receiving over a million car finance claims in just over a month[/caption]
Back in January, the Financial Conduct Authority (FCA) launched an investigation into allegations that providers had artificially inflated the rate of interest applied to millions of car loans.
Just weeks later, the Money Saving Expert site, which Martin runs, introduced a feature where drivers could produce a template complaint letter to send to the companies who sold them their motor.
Martin has now revealed that the template has been used 1,080,000 times – roughly 30,000 times a day.
Based on the FCA’s estimate that around 40% of finance deals could be affected leading to an average payout of £1,100, this means that UK motorists could be owed up to £480 million already.
Martin said: “The number of complaints in not much more than a month is staggering – off the charts – far more than I expected.
“So, it’s not surprising that some firms are struggling to respond to complaints in a decent time.
What is the FCA investigating and who is eligible for compensation?
What is being investigated?
The FCA announced in January that it would investigate allegations of “widespread misconduct” related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers – usually the finance arm of a dealership.
These brokers earn money in the form of commission – a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
“To frustrated complainers, I’d say for now we should be prepared to give companies some wriggle room on timings, but firms need to urgently step up their complaint handling resources.”
He added that “this is just the beginning” and suggested it could be the largest compensation payout since the infamous PPI scandal.
Indeed, the money-saving whizz claimed that the number of complaints is “building up even more quickly” than it did during the PPI storm.
He went on: “In value terms, car finance misselling is potentially going to be the second biggest reclaim payout in UK history – possibly over £10 billion repaid – which could even provide a fillip to the economy as PPI did.”
If you have already submitted a complaint and received a final response between July 12 2023 and November 20 2024, you will have 15 months to appeal to the Financial Ombudsman rather than the usual six.
If you think you may be owed money, new claims can still be submitted, but won’t receive a response until after the FCA completes its probe on September 25.
You can use the free tool on MoneySavingExpert to see if you may be eligible and to draft a claim letter.
It comes after Martin warned of “fob off” tactics from car firms and shared the four next steps in the compensation process.