Martin Lewis warns car finance claimants of ’30 per cent’ problem | Personal Finance | Finance

Martin Lewis has warned anyone making a claim over mis-sold car finance to watch out for an issue which could see them lose around one third of their compensation. In a video released on social media regarding his podcast, Mr Lewis warned about certain claims management companies (CMCs), which handle people’s compensation applications in return for a slice of the final settlement.

Mr Lewis’ warning comes after the Financial Conduct Authority (FCA) about ‘misleading’ adverts by some CMCs. The FCA said it had ‘identified a growing number of adverts that appear to offer independent advice from an individual but are in fact paid promotions from CMCs and law firms’.

It revolves around the car finance mis-selling scandal, which has affected the sale of around 12million vehicles. A £9.1billion refund scheme has been established.

Mr Lewis said: “This is an important listen for anyone who’s put in a car finance mis-selling claim or is planning to. I got this email from Nikki. She says, ‘I tried to claim by myself using the form to be told a company had already done it on my behalf. I’ve not instructed anyone to do this on my behalf. I got in touch with the company and they want to charge me to close their case when I’ve never asked them to. Has anyone else had this?’.

“Well, yes, lots of other people had. In fact, this week, the regulator, the FCA, has launched a template letter for people who feel they have been misled by their claims management company.

“Here’s what I think’s happened. I think you went online on social and you probably filled in one of those forms that says, ‘Check whether you’ve been mis-sold car finance’. You did it when you were scrolling and you put your details in, then you forgot about it.

“What you may not have realised is some of those firms actually count that as signing up to their services and then they say, ‘We’re now acting for you and we want 30% if you got everything’. Well, that simply isn’t acceptable.

“I will be going through in this week’s podcast not just car finance mis-selling, how you claim if you haven’t already, whether you should be putting a claim in, and what to do if you have already claimed and how long the delay is going to be. But I’m also going to be talking about, bizarrely, the meta problem. People who have had problems with their claims management company who they used to claim because they were mis-sold car finance.”

An agreement is eligible for a compensation claim if the driver was not told about at least one of: a discretionary commission arrangement (DCA); a high commission arrangement of at least 39% of the total cost of credit and 10% of the loan; or a right of first refusal, except where the lender can prove there were visible links with the manufacturer and dealer.

Firms are being given up until the end of June 2026 to handle complaints for loans taken out from 1 April 2014, and until the end of August 2026 for loans agreed earlier.

People can either complain directly to their lender, or use one of the many complaint tools now available. Some, such as the one on the MSE website, are free to use. Others take a share of the compensation if successful. This can be more than 30 per cent in some cases.

The FCA said: “As part of the joint regulatory taskforce, the FCA has identified a growing number of adverts that appear to offer independent advice from an individual but are in fact paid promotions from CMCs and law firms encouraging people to sign up for motor finance claims.”

Consumers should be aware that some adverts:

• Pose as impartial advice from individuals, without clearly saying they are promoting a business.
• Misuse logos, imagery or references linked to well-known companies, media outlets or public bodies or figures to falsely suggest their approval or endorsement. The FCA recently banned adverts from a CMC which used edited, unauthorised clips of Martin Lewis, Money Savings Expert, to make misleading claims about average car finance compensation.
• Fail to make clear that you can make a claim yourself for free.

Following action from the FCA, one firm has already agreed to take down all of their adverts. The FCA, working with its regulatory partners, will take further action to stop consumers being duped into signing up without the right information.

Firms must remove any content that misleads consumers and prevents them from making informed decisions. Firms are expected to take action to ensure any consumers that were misled into signing up are put back into their original position. This may include unwinding contracts for free.

Alison Walters, director of consumer finance at the FCA, said: “Accessing compensation is free, and people don’t need to use a claims management or law firm to get what they’re owed. If they choose to, it should be a genuine and well-informed choice, not one made because of a misleading advert.”

Some of the other concerns highlighted by the FCA include:

• Unwanted texts or emails, driving 6 million complaints to the Information Commissioner’s Office this year.
• Consumers being misled by adverts or signed up without their knowledge or consent — for example, by clicking a ‘free compensation checker’ on social media.
• Firms making it difficult for consumers to exit agreements where they have been misled into signing up, aggressively pursuing fees, charging unfair exit fees, or making exaggerated claims for work already done.
• Firms failing to keep clients updated, explain their options fully, or make clear that consumers can take a complaint to the relevant Ombudsman for free.

What you should do now

If you are unhappy with the CMC you used, you should complain directly to them. This can include issues over how you signed up, whether you gave consent and were fully informed about the situation, how your case had been handled, how your data was used, and the fee you have been charged. The FCA has created a template letter (DOC) to help with this.

The FCA stressed that, if you wish to leave now before compensation has been paid, you may be asked to pay a fee. However, this fee must ‘be reasonable and reflect the work done’. If you think you have been signed up without consent, misled or treated unfairly, you can ask to exit your contract for free and may also be owed compensation by the CMC or law firm.

If you’re unhappy with the firm’s response, you can take your complaint to the relevant independent Ombudsman. If the firm is regulated by the FCA, go to the Claims Management Ombudsman. If it is regulated by the Solicitors Regulation Authority, go to the Legal Ombudsman.