Motorists who purchased vehicles between 2007 and 2021 could be owed thousands, says Martin Lewis

Consumer champion Martin Lewis has sounded the alarm for anyone who purchased a vehicle, motorbike, or campervan between April 2007 and January 2021, warning that they may be entitled to thousands of pounds in compensation due to being mis-sold car finance.

This warning comes hot on the heels of the Financial Conduct Authority's (FCA) investigation into car financing, which aims to determine whether customers have been overcharged interest on loans. Martin also highlighted a significant Court of Appeal ruling in October, which could make it easier for people to claim back compensation.

The landmark ruling, although not directly related to the FCA, pertains to 'common law' and may have a profound impact on 'discretionary commission arrangements' (DCAs) - a now-banned car financing practice where dealerships increased interest rates to earn more commission without informing customers, who believed they were getting a fixed price. "A shock exploded through the car finance world on Friday [October 25], as the Court of Appeal issued a precedent-setting ruling favouring consumers over finance firms," Martin wrote in the MoneySavingExpert (MSE) newsletter.

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"That means this is now the law, though if it goes to a Supreme Court appeal, that could take a different view and overrule it..The verdict was unambiguous and said a car sales firm couldn't lawfully receive commission from a finance firm unless it had the customer's 'fully informed consent'."

In essence, Martin suggests that this ruling could potentially bolster the FCA's position, even if there isn't a direct connection. The next update on the FCA's investigation is scheduled for May 2025, but vehicle owners can still lodge a claim today, reports Lancs Live.

To qualify, you must have purchased a vehicle within the 14-year timeframe from April 2007 to January 2021 - this encompasses cars, motorbikes or campervans. However, business cars and static caravans are excluded - only those used for personal use and commuting are included.

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Claims can also be lodged on behalf of someone who has passed away, or for a vehicle that you no longer own. If you believe you meet these criteria, MSE then urges you to utilise its online tool that formally queries your finance firm whether a policy implemented used a DCA.

If the response is affirmative, it'll then automatically register a formal complaint.

MSE once reported that 74% of individuals using its tool found they had a Discretionary Commission Arrangement (DCA). Time is of the essence, as MSE predicts an impending 'time bar' which could restrict claims after a set duration.

The Financial Conduct Authority (FCA), delving into the details, commented: "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."