‘Forget about it’ Martin Lewis says as he reveals sure-fire sign you WON’T get £1,000s compensation on car finance claim
MARTIN Lewis urged drivers to “forget about it” as he revealed a sure-fire sign you won’t be handed £1,000s in compensation over the car finance scandal.
The financial services watchdog, the Financial Conduct Authority (FCA), is investigating thousands of allegedly dodgy deals spanning more than a decade in the car finance scandal.
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It follows claims that providers had falsely inflates the rate of interest applied to millions of car loans.
Now motorists, who believed they were wrongly sold a loan, between 2007 and 2021 have been urged to file a complaint.
Martin Lewis helpfully designed a complaint template for people to use, and it has now been accessed around 1,080,000 times.
The FCA has suggested around 40 per cent of finance deals could be affected – with an average payout of £1,100.
This potentially means a pot of around £490million could be owed to UK motorists already.
The Money Saving Expert said previously this could be “the second biggest reclaim payout in UK history” with potentially £10billion awarded.
But not all drivers have received the response they expected.
Speaking on Martin Lewis’ BBC podcast, the MSE heard from one man who was told by his car dealership that he was not eligible for a payout.
The confused customer asked Martin if this would still be the case when the FCA makes its final ruling – expected later this year.
Martin said: “Now for a regulated firm to say you didn’t have a DCA. Well first of all it’s good news, you weren’t mis-sold, you didn’t have the commission taken in that way.
“I think it is unlikely that firms would lie about it given the extremely high level of regulatory scrutiny that they are under.
“My honest view is if I were you at this point I’d fold up the piece of paper, put it in a drawer, get on with your life and forget about it.”
The MSE did say while there could have been a “data glitch” but that this would be very “unlikely”.
What is the FCA investigating and who is eligible for compensation?
What is being investigated?
The FCA announced in January that it would investigate allegations of “widespread misconduct” related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers – usually the finance arm of a dealership.
These brokers earn money in the form of commission – a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
You can check whether you might be owed money and submit a complaint using Martin Lewis’ free tool here.
How to submit a complaint
You can file a complaint to your loan provider directly and wait for an FCA report to be done.
And, you can make use of the free tool on MoneySavingExpert to see if you may be eligible and to draft a claim letter.
Martin previously urged people to check whether your provider has issued a receipt of acknowledgement, usually in the form of an email.
This will record the time that your complaint was received, upon which all subsequent deadlines are based.
If you receive a final response to your complaint before November 20 2024, you can appeal to the Financial Ombudsman within 15 months.
The final deadline to appeal is February 2026.
For those who are given a response after that date, the appeal window will be six months, meaning you would have to challenge it by May 2025.
It comes after Martin warned of “fob off” tactics from car firms and shared the four next steps in the compensation process.
What is a discretionary commission agreement and why might you be due money back?
A discretionary commission agreement (DCA) was a charge attached to certain types of car finance deals in the UK.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers – usually the finance arm of a dealership.
The brokers earn money from a commission percentage of the interest paid on the loan.
Under DCAs, brokers were allowed to artificially increase the interest rate above what the market dictated in order to increase their own commission payments.
This practice was banned by the FCA in January 2021 but the watchdog believes that it could have resulted in millions of Brits overpaying on finance deals struck before then.
You can read more about the brewing compensation scandal, who is eligible and when and how to submit a complaint in our explainer on the subject.
