Collective actions
Millions of drivers will be eligible for compensation in ongoing car finance scandal
The latest news with the ongoing mis-sold car finance claims shows that anyone who took out car finance before 2021 could be eligible to make a complaint, possibly doubling the number of eligible people who could be due a payout.
In the latest development, the Financial Conduct Authority (FCA) is considering expanding its investigation into the car finance industry. Initially focusing on discretionary commission agreements, it now encompasses all types of commission-based car finance deals made between 2007 and 2021. This has the potential to rival the scale of the infamous PPI compensation scandal, with industry experts predicting payouts could soar beyond the estimated £16 billion.
What is the mis-sold car finance scandal?
At the heart of the FCA's investigation are car finance agreements that included commission payments. These agreements saw car dealers increasing interest rates to maximize their commission, a practice that was outlawed in 2021. However, a recent Court of Appeal ruling found that even fixed commission agreements—where dealers received a set payment regardless of interest rates—could also be illegal if customers were not informed.
The FCA’s decision to widen its probe means millions of drivers could now claim compensation. In 2019 alone, 2.5 million cars were purchased through finance agreements, many of which involved commission fees.
What could this mean for consumers?
If you financed a car between 2007 and 2021, you might be entitled to compensation. The FCA has acknowledged that motor finance firms are likely to face a deluge of complaints, which has prompted it to extend the time companies have to respond. This is crucial for ensuring that complaints are handled fairly and efficiently.
According to consumer rights expert Martin Lewis, this investigation could pave the way for anyone who entered into a car finance agreement during the specified period to be eligible for compensation.
The Court of Appeal's ruling has already had a significant impact. Several banks and lenders are bracing for large compensation payouts, with Lloyds Banking Group setting aside £450 million. The Finance & Leasing Association, representing lenders, has supported the FCA’s move to broaden the investigation, calling it a "sensible" decision.
What should you do next?
If you bought a car on finance between 2007 and 2021, now is the time to act. At Slater and Gordon, we specialise in financial mis-selling claims and can help you navigate the claims process. Our team of experienced solicitors are continuously keeping an eye on any future developments. Checking to see if you are eligible is simple, simply visit here for all the information.
