MARTIN Lewis has warned drivers not to accept “fob off” tactics in the unfolding car finance claims scandal as over half a million complaints have already flooded in.
An investigation into whether lenders overcharged customers on their purchase agreements is underway, with as many as 40% of deals estimated to be affected.
Martin Lewis has revealed that over half a million car finance complaints have already been submittedITV
GettyA watchdog investigation into ‘dodgy’ commission arrangements is ongoing (stock image, posed by models)[/caption]
Drivers who bought a car on agreements like Personal Contract Purchase (PCP) or Hire Purchase (HP) before January 2021 may have overpaid to the tune of thousands of pounds.
The Financial Conduct Authority (FCA) is probing the deals over how brokers earned commission payments from them and estimates that millions of Brits could be entitled to compensation in what Martin believes could be “the UK’s second biggest reclaim after PPI.”
Now, in the latest update to his campaign on the issue, the personal finance guru has revealed that over half a million complaints have already been submitted through the free tool on the Money Saving Expert website.
He said: “In just seven days you’ve sent over 530,000 complaint emails.
“The regulator, the Financial Conduct Authority (FCA), estimates 40% of finance agreements had these dodgy commission arrangements and the average payout per arrangement may be £1,100.
“So that potentially equates to up to £234 million coming back to people.”
Martin also shared some of the next steps you should take once you’ve submitted your complaint.
Firms usually have to respond to complaints within 28 days but, according to Martin, “many simply weren’t prepared” for the scale of the issue, so may take longer to get back to you.
When they do respond, the answer will likely fall into one of four categories, he explained.
First, the lender may tell you that there was no “discretionary commission agreement” (which is what the FCA is investigating) on your deal.
If that’s the case, you don’t need to do anything as it means you haven’t overplayed.
Secondly, the company could come back to let you know that you did have a discretionary commission agreement attached to your deal, which would not have been disclosed at the time, and that your complaint has been logged.
In that case, all you need to do is sit tight and wait until the FCA concludes its investigation in September.
Usually, firms would be required to give you a final response to your complaint within eight weeks, but this deadline has now been suspended until the probe is finished.
Thirdly, Martin warned of some brokers admitting that a discretionary commission was in place but giving you a “fob off” in response.
If they refuse to admit any wrongdoing or reject your complaint out of hand, it will still have been logged so you should still wait and see.
He advised against going to the Motoring Ombudsman until September even if the response tells you to.
Some firms may tell you that you only have six months to appeal to the Ombudsman, but this information is out of date as the FCA has extended that to 15 months from the final response for complaints of this nature, so you have plenty of time.
What is a discretionary commission agreement and why might you be due money back?
A discretionary commission agreement (DCA) was a charge attached to certain types of car finance deals in the UK.
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.
The brokers earn money from a commission percentage of the interest paid on the loan.
Under DCAs, brokers were allowed to artificially increase the interest rate above what the market dictated in order to increase their own commission payments.
This practice was banned by the FCA in January 2021 but the watchdog believes that it could have resulted in millions of Brits overpaying on finance deals struck before then.
You can read more about the brewing compensation scandal, who is eligible and when and how to submit a complaint in our explainer on the subject.
Finally, they may tell you that they can’t find the information related to your deal.
Martin said: “This is a trickier one.
“The FCA says firms should make serious endeavours.
“If your car finance was active within the last six years, they should have details.
“If it was further in the past, it’s trickier, but they should try.”
He promised drivers that he would issue an update in the coming weeks with more clarity on this aspect of the claims process.