UP to 30million drivers could get be entitled to a £950 payout.
Motorists will soon hear the details of the long-awaited car finance compensation scheme.
1
The Financial Conduct Authority (FCA) has said it will make an announcement this afternoon, Tuesday, October 7.
This is expected to be shortly after markets close at 4pm.
It comes as the watchdog has been consulting on a redress scheme for motorists who were unfairly charged extra fees and interest.
This came despite a Supreme Court ruling that hidden commission from lenders to dealers was not unlawful, meaning that millions could no longer claim.
But the judgement said compensation could still be claimed for particularly large commissions, which the Supreme Court said was unfair.
The FCA believes that millions of customers should still receive compensation under these circumstances.
For example, drivers who took out personal contract purchase (PCP) or hire purchase agreements could be entitled to a claim.
This is because the FCA has been investigating and considering a financial redress scheme for car finance agreements made before 2021.
These claims focus on “discretionary commission arrangements” (DCAs), which applied to 40% of car finance deals.
Under DCAs, brokers and dealers could increase the interest rates charged to borrowers without informing them.
By doing this, they earned higher commissions.
Up to 30million cases between 2007 and 2020 could be reviewed, however it is not guaranteed everyone will be entitled to claim.
Nikhil Rathi, chief executive of the FCA, previously told MP’s the watchdog, consulting on an industry-wide compensation scheme because there was “evidence that there have been unfair relationships between lenders and their consumers”.
He added that a “large number of consumers were not properly informed” about the interest rate on their motor finance deal.
It is hoped that payouts can then be dolled out at the start of next year, with the average sum set to be £950.
However, the exact amount of compensation you may be entitled to will depend on the terms of your loan and the original cost of your vehicle.
HOW TO CLAIM
Consumer finance website MoneySavingExpert.com offers an email template to help you complain to your finance provider.
You can download this by visiting moneysavingexpert.com/reclaim/reclaim-car-finance.
Alternatively, you can complain directly without using the template.
It’s crucial for anyone who took out car finance to file a claim, even if a previous claim was denied.
In your complaint, ask whether you were overcharged due to your broker receiving a commission and request the company to rectify this if it occurred.
If you’re unsatisfied with the company’s response, you can escalate your complaint to the Financial Ombudsman Service (FOS) at no cost.
‘I wish I never took that car finance loan out’
ROY Turner is one of millions of drivers who could still be due cash.
The 57-year-old pizza delivery worker, from Tayport, bought a BMW 118D in 2016 to help his disabled wife, Elaine, with her mobility issues.
He bought his car for £8,650, but the cost of the credit was an eye-watering £9,356, bringing his total bill to £17,996 with an interest rate of 39.1 per cent APR.
His deal was a discretionary commission arrangement (DCA).
He said the car dealer, John Clark Aberdeen, did not do an affordability check to see if he could afford the £157 monthly repayments, which he struggled to pay.
“It’s been stressful – it was hard to afford the car loan,” he said.
“I was struggling to afford phone bills. If the car needed repair work or an MOT, I would need to borrow money from friends. It was very embarrassing.
“I wish I never took it out because of the interest rate.”
