Martin Lewis explains huge update to car finance mis-selling compensation claims – and there’s good news for drivers
MARTIN Lewis has revealed a huge update to the car finance mis-selling scandal.
It comes after the financial watchdog announced that it has pushed back the outcome of its investigation into hidden, unfair car finance commission.
However, the move now means that compensation will now be more likely.
In a recent post on X (formerly Twitter), Martin Lewis said: “The regulator, the FCA has just announced the planned decision on whether firms systemically miss-sold car finance due to Discretionary Commission Arrangements will be moved from Sept 2024 to May 2025.
“More so it has delayed when firms must deal with complaints even further, to Dec 2025.
“Its announcement indicates there’s a chance that in May it will launch a consultation on a redress scheme (and the Court will have decided on a key case by then), and the move to December is so it’d be able to finish that consultation before firms have to put it in place.
“Clearly the delay is disappointing for those awaiting a decision.
“Yet it does signal it’s still looking favourably on ruling it is mis-spelling and a payout is due – even though the finance firms have been pushing back hard both publicly and through the courts.
However, a conversation between the founder of MoneySavingExpert.com and Sheldon Mills at the FCA has hinted that compensation is now far more likely.
“The most important thing people can do is log their complaint ASAP, so that if there is a time bar, hopefully, there’s less chance of it being ruled out of time,” Martin added.
THE CAR FINANCE SCANDAL
Before January 2021, some car finance lenders allowed brokers who arranged loans to set, or increase, interest rates for customers.
It was known as a “discretionary commission arrangement”, and the higher they set your interest rate the more commission they earned.
Customers did not know this was in place or that they were paying over the odds for car insurance.
The practice was banned in January 2021 by the Financial Conduct Authority.
Since then, complaints have rocketed, with more than 17,000 filed to the Financial Ombudsman Service.
The FCA told car finance firms to review their practices and fix any wrongdoing — but this hasn’t happened.
Around 30,000 motor finance complaints were dealt with by major lenders between January 2019 and the end of June 2023.
Of these, 99 per cent were rejected because lenders do not think they have done anything wrong.
At the start of the year, the Ombudsman ruled that two complaints, one against Black Horse Finance, part of Lloyds Banking Group, and one against Barclays Partner Finance, be upheld and compensation paid.
If the FCA decides a large number of customers are owed money it could set up an industry-wide compensation scheme.
It will now report its findings in May 2025.
Who can make a claim?
YOU must have used finance, which includes hire purchase agreements such as Personal Contract Purchases, to buy a car, van, campervan or motorbike before January 28, 2021.
Your lender or broker must have used a discretionary commission arrangement.
You may not know this but if you ask them, they have to tell you.
You are not eligible to claim if you took out a lease agreement or if your finance arrangement had a zero-per-cent interest rate.
Typically, complaints about any finance product need to be made to the provider within six years of a problem occurring.
If it has been longer than that, it should be within three years of you finding out there is a reason to complain.
COMPLAIN NOW FOR FREE
If you think you’ve been affected, you can complain to your lender or the broker.
In your letter, state your full name, address and date of birth, your loan reference number, the date you bought the car and your car’s registration number.
If you took out the loan more than six years ago, tell the provider you have just learnt there may be an issue.
Ask them to tell you if there was a discretionary commission arrangement in place — and say that if there was, you want them to investigate your complaint about this arrangement.
There are many free templates available, from companies such as Consumer Voice and Which? that can help you word your letter.
Martin Lewis’ MoneySavingExpert.com has a free car finance reclaim guide and tool.
Visit www.moneysavingexpert.com/reclaim/reclaim-car-finance/#free-tool to find out more.
The sheer volume of complaints has become too difficult for firms to deal with so the FCA has paused the usual eight-week deadline that companies have to respond to you.
Firms have also now been given until at least December 4 2025, to give you a final response if you’ve made or make a complaint.
If you are unhappy with the outcome, you can take your complaint to the Ombudsman.
Their usual six months response time has been extended to a maximum of 15 months.
What about no-win, no-fee firms?
CLAIM-chasing firms offer to fill in the paperwork and chase compensation for you, and while they are legal, experts slam them for taking a slice of the cash.
However, if you want to keep 100% of your compensation, file the complaint yourself.
Fees vary between firms — but they can take up to 50 per cent, plus VAT.
Drivers could also be charged a fee if they decide to cancel after instructing a claims company.