MoneySavingExpert.com (MSE) has reported that more than 1,080,000 car finance complaint letters have been submitted since 6 February 2024.
The money-saving website launched its free car finance reclaim tool last month, predicting that mis-sold car finance could become the UK’s second-biggest reclaim after PPI.
Since the launch of the car finance reclaim tool, an average of 30,000 claims per day have been submitted. This could result in a total payout of more than £480,000,000, according to calculations by MSE, with more than a quarter of complaints coming from people with multiple agreements.
MSE said the most complained-about lenders so far are Black Horse, Volkswagen Financial Services and Stellantis Financial Services.
What is car finance commission mis-selling?
In January 2021, the Financial Conduct Authority (FCA) banned car finance lenders from making ‘discretionary commission arrangements’ with brokers for hire purchase (HP) or personal contract purchase (PCP) deals.
These were deals where brokers were able to adjust interest rates offered to customers on a loan, and benefit from a bigger commission from the lender if the customer accepted the deal. These were known as discretionary commission agreements (DCAs) and customers were rarely told about them.
This meant finance brokers had a financial incentive to offer maximum rates to customers, rather than finding them the cheapest deal, meaning many people were probably overcharged for their loans.
In January 2021, the FCA banned DCAs, and subsequently launched a mis-selling investigation in January 2024.
MSE founder Martin Lewis believes it is unlikely the FCA would have launched such a huge public investigation unless it had strong evidence of systemic mis-selling.
Yet he warned that, until the FCA reports its findings, nothing is certain. One big risk is that there is a time bar placed on complaints – so Lewis is urging people to log a complaint as soon as possible, to avoid the risk of being timed out.
MSE’s reclaim tool negates the need to use a no-win, no-fee claims firm. Users need to answer a few questions on their car finance agreement, and the tool then builds an email to request information on whether you had a DCA, then logs a complaint.
Martin Lewis said: “The numbers of complaints in not much more than a month is staggering – off the charts – far more than I expected.
“So, it’s not surprising that some firms are struggling to respond to complaints in a decent time. To frustrated complainers, I’d say for now we should be prepared to give companies some wriggle room on timings, but firms need to urgently step up their complaint-handling resources.
“And this is just the beginning. Even though we were at the vanguard of PPI and bank charge reclaiming, in terms of numbers of complaints, this feels like it is building up even more quickly. In value terms, car finance mis-selling is potentially going to be the second-biggest reclaim payout in UK history – possibly over £10bn repaid – which could even provide a fillip to the economy, as PPI did.
“Lloyds has already put aside a provision of £450,000,000 towards potential costs and payouts for this – a strong indication that it thinks it, and by inference others, will probably need to pay back money due to discretionary commission arrangement mis-selling. Though, of course, we won’t know until the FCA’s ruling, due in September.”
