The Financial Conduct Authority launched an investigation into hidden, unfair car finance commission and Martin Lewis has now shared a huge update which could impact millions
Money guru Martin Lewis has issued a huge update to all car drivers who have bought a vehicle on finance in recent years.
The Financial Conduct Authority (FCA) launched a major investigation in January looking into hidden, unfair car finance commission. Essentially, drivers who used finance deals to purchase their cars between the years of 2007 and 2021 could be in line for an average payday of £1,100.
The FCA is currently investigating a practice called Discretionary Commission Arrangements (DCA) which saw lenders allow those who arranged car loans – including car dealers – to adjust their customers’ interest rates. This meant that the higher the interest rate given to a customer, the more commission whoever was arranging the loan would receive – something that was banned in 2021.
But in an update published on Money Saving Expert (MSE), the website founded by Martin Lewis, car finance mis-selling is no longer just about DCAs. The website states: “Of the 99% of car finance deals with commission on them, only 40% had the Discretionary Commission Arrangements this guide is about.
“DCAs are the most likely route to get money back, so my best guess is to start with this guide, as the first check is to see if you had a DCA, which our free tool helps you do. Yet in October 2024 a landmark Court of Appeal ruling meant everyone who’s had commission, of any type (not just DCAs), may be owed money back too.
“So, if you’re told you didn’t have a DCA we’ve a new car finance commission disclosure guide & tool you may want to read after.” This means that millions more people may be able to claim money back on past car finance deals.
If you have already been told there were no hidden DCAs in your car finance agreement, you may still be due a pay out. While MSE admits it is a “uncertain situation”, the website explains: “If you weren’t told all the facts you needed to make an ‘informed decision’ on your car finance deal, including the type and amount of commission the dealer or broker was going to be paid, then it was a breach of the law. And as people were rarely told the commission amount, or how it was worked out, this opens the door to a large number of similar cases.
“This unexpected verdict sent shockwaves through the car finance industry, caused wobbles for regulators and reverberated right across the financial world. As it’s a precedent-setting Common Law decision, that means right now it is the law in the UK.
“Yet an application for an appeal to be heard at the Supreme Court has already been put in, and it is almost certain to hear the case. It would not be unusual for the Supreme Court to have a starkly different view to the Court of Appeal and overrule it, thus in practice changing the law again. A decision needs to be made speedily, by spring 2025, so there’s clarity, but there’s no guarantee, and even then the fallout and any pay-outs will take time.”
MSE is offering people a free car finance commission tool and template letter, which asks for some basic details and then puts together an email drafted by Martin, which has had feedback from lawyers and regulators. This letter can then be sent to car finance providers which may result in a pay out. For more information from MSE visit their website.
