Martin Lewis' MoneySavingExpert has issued a new warning about 'mis-sold' car finance, suggesting that vehicle owners could be owed more than £1,000. This primarily concerns anyone who purchased a car, van, camperVan or motorbike between April 2007 and January 28, 2021.
The alert comes as the Financial Conduct Authority (FCA) is conducting an investigation into car financing, assessing whether customers have been overcharged on interest for loans. While the next update is not due until May 2025, vehicle owners can still lodge a complaint claim today - but they need to act swiftly.
"Our car finance reclaiming guide takes you through it step-by-step, but in a nutshell, you may be able to claim £1,000s back due to HIDDEN Discretionary Commission Arrangements (DCAs) on your policy," MSE wrote. "These DCAs are where finance firms let car dealers pump up interest rates, without customers being told, and then bunged 'em extra commission if they did. This likely meant many OVERPAID WITHOUT KNOWING and may be due a predicted average £1,100 back."
If you're unsure whether a DCA was included in your policy, there's no need to worry. The complaints procedure only considers two types of finance taken over the 14-year period. This includes Personal Contract Purchase (PCP) and Hire Purchase (HP), but leasing is not covered.
Experts emphasise that only vehicles used for personal commuting are included in this, while business cars and static caravans are not. Claims can even be made on behalf of someone who has passed away, or for a vehicle no longer in your possession.
If you believe you meet the criteria, Money Saving Expert (MSE) encourages you to use its straightforward online tool to formally ask your finance company if a Discretionary Commission Arrangement (DCA) was used in your policy. If the answer is affirmative, it will automatically register a formal complaint.
Remarkably, MSE asserts that 74% of those who have previously utilised this tool discovered they had a DCA. However, potential complainants are urged to act swiftly.
When the update arrives in May 2025, MSE speculates that a 'time bar' may be introduced, preventing some individuals from claiming after a certain period.
The FCA also explains: "Before January 2021, some lenders allowed brokers (the person that arranges your loan, for example, your car dealer) to adjust the interest rates they offered customers for car finance.
"The higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement (DCA). And it may have been applied to your loan without you knowing.
"DCAs created an incentive for brokers to increase how much people were charged for their car loan. We banned this practice in 2021. But there have since been a high number of complaints from customers about how much they were charged before the ban. Providers are rejecting most of these complaints, because they believe they haven't acted unfairly and haven't caused customers to lose out.
"We're reviewing the issue to make sure that, if you're owed compensation, you get it in the best way possible."
