Car and van buyers nationwide have encountered a setback as the Supreme Court rejected the potential for compensation related to undisclosed commission payments on car finance loans. The court’s ruling overturned a previous decision that could have resulted in numerous motorists receiving compensation for wrongly sold car finance agreements.
In a significant development, the UK’s highest court ruled in favor of finance companies in two of three pivotal test cases involving commissions paid by banks and lenders to car dealerships. This verdict overturned prior rulings that had paved the way for many drivers to seek compensation.
Despite this outcome, there is a ray of hope for individuals who engaged in a specific type of finance arrangement known as a Discretionary Commission Arrangement (DCA). These agreements, common in Personal Contract Purchase (PCP) and Hire Purchase deals until 2021, allowed for potential loan amount increases to enable brokers or dealers to earn higher commissions.
Martin Lewis, the founder of Money Saving Expert, has provided guidance on his website regarding this matter. He has advised affected individuals to submit a claim, emphasizing that there is no harm in attempting to secure compensation.
Lewis recommended: “Given the recent developments and regulatory clarity, it is advisable to file a complaint if you suspect you were part of a DCA agreement. Utilize our free complaint tool to facilitate this process,” as reported by the Express.
Furthermore, he suggested that individuals with old cases where finance details may have been deleted should still submit a claim to ensure their case is reviewed. In newer cases, the focus is on determining if individuals had a DCA and are eligible for compensation.
The Financial Conduct Authority (FCA) has announced plans to consult on a redress scheme for hidden commissions in car finance transactions. The potential compensation scheme could amount to billions, benefiting millions of consumers impacted by these practices.
The FCA reassured those who have already lodged complaints that further action is unnecessary. It urged those who have not yet filed a claim to contact their car loan provider directly without involving claims management companies.
Nikhil Rathi, the FCA’s chief executive, affirmed that firms violating regulations should compensate their customers fairly. The FCA aims to establish a compensation scheme that is accessible and fair, advising against the use of claims management companies or law firms to avoid additional costs.
The controversy surrounding car finance mis-selling traces back to 2021 when the FCA prohibited DCA agreements that incentivized dealers to impose high-interest rates on consumers. Since January, the FCA has been deliberating on compensation for affected individuals pre-2021, with plans to launch a consultation to determine eligibility and compensation amounts following a recent Supreme Court decision.