Revolutionary compensation for car finance is now available for drivers who may have been mis-sold car finance prior to 2019. Social media platforms such as Google, Facebook, and Instagram have become popular places for advertisements and emails offering compensation. With some claims promising hundreds or even thousands of pounds in compensation, it’s important for consumers to understand the details and their options.
Mis-sold car finance claims usually involve two primary types of car finance: hire purchase loans and personal contract purchase (PCP). With hire purchase, consumers pay fixed monthly repayments, a deposit, and a final fee to own the car outright. On the other hand, PCP is more popular but more complicated. Consumers pay a deposit and make fixed monthly payments to cover the car’s depreciation and interest on the loan, and at the end of the deal, they can either trade the car in for a new one or make a “balloon payment” based on the vehicle’s value to keep it.
Complaints about car finance have increased regarding commission, fees, and charges, with a rise from 24% in 2021-22 to 49% in 2022-23. Car dealers would get discretionary commission linked to the interest rate charged to borrowers, which the FCA banned in January 2021. This has resulted in consumers saving £165 million a year in interest. To ensure customers receive better information about interest charges and commission, new rules are also now in place.
Consumers can complain to the Financial Ombudsman Service (FOS) if they believe they have been mis-sold. It’s important to note that complaints can be made about loans agreed upon years ago, within six years of either the point of purchase or the end of a loan agreement.
The Financial Ombudsman Service stated that it has not yet published any final decisions on commission-related complaints about car finance loans, but some complaints are likely to be upheld while others won’t be. The complaints represented a tiny minority of outstanding car finance agreements, according to the Finance and Leasing Association (FLA).
Consumers must complain to the lender first, ask for details about commission, and check it against any paperwork they received. If dissatisfied with the outcome, they can take the complaint to the Financial Ombudsman Service, which is free to use. Claims management companies can take up to 30% of compensation payout, capped at £420, and it is important to ensure they are regulated by the Financial Conduct Authority or the Solicitors Regulation Authority