Hundreds of thousands of people have submitted complaints for overpaid car finance interest off the back of a Martin Lewis Money Show tip.
The issue, which could result in a payout averaging £1,1000 each, affects people who were loaned funds through a car finance deal to purchase a motor vehicle, where the finance agreement was dated before January 28, 2021.
The Money Saving Expert founder took to his ITV show last Tuesday to warn people that around 40 percent had a hidden “discretionary commission arrangement” and could be owed money, with the Financial Conduct Authority (FCA) currently investigating the issue.
Since the show, more than 463,000 complaints have been filed with motor finance firms, which could total millions of pounds payback, collectively.
Mr Lewis recently posted on X, formerly Twitter: “Car Finance Reclaiming Stats Update: In the first 3 days: 463,750 complaint letters now generated, 40 percent likely to have had the hidden commission, Typical expected pay-back £1,100. So a conservative predicted £204million total.” (sic)
In 2021, the FCA banned discretionary commission arrangements. This removed the incentive for brokers to increase the interest rate that a customer pays for their motor finance to increase their commission.
The FCA launched an investigation in 2024 into companies that may have caused “harm” by their previous commission arrangements.
The FCA said in a statement: “If we find there has been widespread misconduct and that consumers have lost out, we will identify how best to make sure people who are owed compensation receive an appropriate settlement in an orderly, consistent and efficient way and, if necessary, resolve any contested legal issues of general importance.”
While the FCA has currently “paused” the deadline for motor finance firms to provide a final response to relevant customer complaints, the MSE team is urging people to log their complaints anyway to reduce the risk of being ruled out for compensation at a later date.
MSE wrote: “Even with the FCA’s pause in place, we think it’s worth logging a complaint now to help reduce the risk of being ruled out if a future time limit is imposed.
“Plus a time-logged complaint may be useful if it were to go to court in future.”
People can check whether they are due some money back by using MSE’s free car finance reclaim tool.
Who may be able to claim?
According to MSE, people who meet the following criteria are likely to be affected, and those who had multiple eligible car finance deals may be due multiple payouts.
People who bought a motor vehicle, such as a car, van, campervan or motorbike, on finance. Caravans without a motor aren’t included.
The finance agreement had to be taken out before January 28, 2021 (and most likely after April 2007).
The vehicle had to be for primarily personal not business use.
People can reclaim on behalf of someone who’s passed away.
It does include Personal Contract Purchases (PCP).
It also includes hire purchases.
People can still claim if the car is paid off.
People can claim even if they’ve submitted a claim for diesel emissions.
However, it will not include Personal Contract Hire or interest-free finance.
The FCA investigation is expected to conclude on September 25, 2024.