Yahoo News New Martin Lewis £1,100 car finance refund update before compensation decision due in 12 weeks
Martin Lewis has revealed that a staggering 1.7 million people who believe they may have been mis-sold car finance and due a refund worth thousands of pounds have used a free online template at MoneySavingExpert.com (MSE.com) to generate a complaints letter to send to their lender.
Earlier this year, Martin explained how millions of people who bought a car, van, campervan or motorcycle on finance before January 28, 2021 may be owed money after being charged ‘hidden commission’. He explained that drivers typically paid £1,100 more interest on a £10,000 four-year car finance deal when there was a Discretionary Commission Arrangement (DCA) - but added that the bigger the loan, the more money you could be owed.
An investigation by the Financial Conduct Authority (FCA) on whether or not compensation payouts could be due is expected to conclude on September 25, 2024. But in this week’s MSE.com newsletter, the consumer champion is urging people who haven’t already registered their complaint to do it now as the “clock is ticking”.
Writing in the newsletter, Martin said: “The clock is ticking for the financial regulator, the FCA, to make its decision on car finance mis-selling. Since the investigation was announced in January, 1.7m complaints have been made via our free tool alone.”
He added that if the FCA “rules in favour of mass payouts, that could equate to £750,000,000 being repaid for complaints made via the tool”.
Martin has previously compared the potential scale of compensation payouts to the PPI scandal.
He went on to share details of new research by the MSE.com team which indicates that 74 per cent of people who have made a complaint have been told they did pay the hidden commission. Similarly, the survey suggests that 26 per cent did not.
Martin explained: “The percentages vary substantially by firm. For Black Horse, MotoNovo and Close Brothers, over nine in 10 who've had final answers tell us their reply states they did have a DCA, yet for VW Financial Services it's fewer than four in 10.”
Martin urged those who may have been affected by the hidden commission charge to make a complaint using the online template now as the FCA may set a “time-bar introduced when the investigation ends, so sooner means less chance you'll be caught out by that”.
You can read full details on how to use the online letter template on MSE.com here.
MSE.com's five car finance commission mis-selling need-to-knows
This is for those who bought a car, van, campervan or motorbike on PCP or Higher Purchase deals (not leasing) for primarily personal use between April 2007 and 28 January 2021.
Lenders said brokers and car dealers had discretion to push the interest rates higher, and the more they did that, the more commission they’d receive. These were called discretionary commission arrangements (DCAs) and customers were rarely told about them. Around 40% of these car finance deals had DCAs, meaning millions overpaid without knowing. So without checking, people won’t know if it happened to them.
In January 2021, the FCA banned DCAs, and in January 2024, it launched a huge mis-selling investigation. The deadline for dealing with complaints has been extended until the FCA reports its findings on 25 September 2024.
Martin Lewis believes it is unlikely the FCA would’ve launched such a huge public investigation unless it had strong evidence of systemic mis-selling. Yet he says until the FCA reports its findings, nothing is certain - and as one big risk is that there is a time bar placed on complaints, urges people to log a complaint as soon as possible, to avoid the risk of being timed out.
There is no need to use a no-win, no-fee claims firm. With the totally free MSE tool, found here, you just answer a few questions on your car finance agreement (answers aren’t recorded, so as not to inadvertently data-mine) and then the tool builds an email to request information on whether you had a DCA, then logs a complaint.
Update for people who have already complained
Martin also gave an update for those who have already sent a complaint letter to their lender. Full details can be found here.
He explained there are three possible outcomes for over 1.7m who have submitted a complaint:
It says 'you did have a DCA' - Your complaint is logged, you've done all you can and just need to wait on the FCA decision.
It says 'your car finance did not have a DCA' - You weren't overcharged, so no refund is due.
It has only 'acknowledged your complaint ' - Martin said that while this might be frustrating, at least your complaint is logged, so sit tight until the FCA decision.
