What is a mis-sold car finance claim?
In January 2021, the Financial Conduct Authority (FCA) took action by banning 'discretionary commission arrangements' (DCAs). These arrangements prohibited lenders from allowing brokers, including car dealers, to raise interest rates on car finance to receive additional commission without providing any additional service. This practice was unfair as consumers were not informed, and many assumed the prices were fixed and did not negotiate.
On January 11, 2024, the FCA launched a major investigation into this matter. The public announcement of such an investigation suggests that substantial evidence is already in place. Currently, the FCA is leveraging its enhanced investigatory powers to gather evidence at a firm-by-firm level.
It is probable that upon completion of the investigation, currently planned for September, the FCA will establish a large-scale redress scheme.
The 'are you likely to be affected?' checklist.
The FCA estimates that 95% of car finance agreements utilised a commission model, with 40% employing the crucial 'discretionary commission arrangements' (DCAs). If your agreement fell under this category, and it was not transparently disclosed to you – which was often the case – it is likely that you could be entitled to a refund once the FCA completes its investigation.
- Your vehicle purchase must have been financed, including cars, vans, campervans, and motorbikes (caravans without a motor are excluded).
- The finance agreement must have been initiated before January 28, 2021 (and most likely after April 2007).
- Eligibility may extend to those with agreements still in force, those whose agreements ended within the last six years, and possibly those lodging complaints within three years of becoming aware of the issue. This could potentially include individuals with much older agreements due to the recent mainstream attention to the matter.
- The vehicle must have been primarily used for personal, rather than business, purposes. Commuting is considered personal use, but frequent business use or payment through a business account may disqualify the claim.
- Personal Contract Purchases (PCP) and hire purchase agreements are included.
- Claims can still be made even if the vehicle has been fully paid off or repossessed.
- If you had multiple eligible car finance agreements, you may be entitled to multiple refunds. Each case is unique.