Introduction to the Car Finance Scandal
Thousands of drivers who bought cars before 2021 could be due for payouts because the Financial Conduct Authority (FCA) has declared that they will contact a remuneration system. The FCA stated that the review of the earlier use of motor financing "showed that many companies neither comply with the law nor our disclosure rules that were in force when selling loans to consumers."
Background on the Issue
The FCA said that where consumers have lost, they should be adequately compensated in a proper, consistent, and efficient manner. The costs of a system, including remuneration and administrative costs, are not lower than 9 billion GBP, and that a total cost of 13.5 billion GBP is "more plausible". It is unclear how many people could be considered for a payment. The authority estimates that most people will probably receive less than 950 GBP of compensation.
Eligibility for Compensation
Drivers must have completed a PCP agreement (PCP) or an HP agreement (rental purchase (HP) to be eligible for compensation. The FCA says they could be affected if they bought a car as part of a financial system, including rental purchase agreements before January 28, 2021. Anyone who has already complained does not have to do anything.
What Drivers Should Do Next
The authority added: "Consumers are concerned that they were not informed about commissions and the belief that they may have paid too much for finance should complain now." The website advises drivers to first complain to their financial provider. If you are dissatisfied with the answer, you can contact the Financial Ombudsman. The FCA has announced that every remuneration system will be easy to participate in without drivers having to use a claim administrative company or a law firm.
Warning About Claim Management Companies
The FCA has warned drivers that using a claim management company to handle their complaint will cost 30% of the fees for compensation. The consultation will be published by the beginning of October and each program will be completed in good time so that people will receive compensation next year.
Supreme Court Ruling
The announcement comes after the Supreme Court decided on a separate but similar case on Friday. The court raised a decision that would have caused millions of drivers to have compensation for "secret" commission payments to car dealers as part of the financial agreements. The FCA case concerns the discretionary officers (DCAS) – a practice banned in 2021.
Discretionary Commission Arrangements (DCAS)
As part of these agreements, brokers and retailers increased the amount of the interest they deserve without sharing the buyers and received more commission for this. This should then incorporate sellers to maximize interest rates. In view of the judgment of the Supreme Court, each compensation system could also cover agreements from the non-discretionary commission, according to the FCA.
Response from the FCA
Nikhil Rathi, Managing Director of the FCA, said: "It is clear that some companies have violated the law and our rules. It is fair that their customers are compensated. We would also like to ensure that the market on which millions of millions are dependent every year can continue to work well and that consumers can make a fair offer."
