Martin Lewis warns Brits could miss out on £1000s in car finance compensation due to simple mistake
MARTIN Lewis has warned that Brits could be missing out on thousands in car finance compensation due to a simple error.
The personal finance whizz urged drivers to submit their claims as time is ticking down to recover their cash.
Back in January, the Financial Conduct Authority (FCA) launched an investigation into thousands of allegedly dodgy finance deals made since 2007.
The regulator estimates that almost half of finance deals may have been affected and that victims could be owed an average of £1,100 each – a total pot of over £480 million.
Martin has suggested that it could be the biggest compensation scheme since the PPI scandal of the late noughties.
However, the money-saving guru has now warned that there is a “risk” that people who don’t submit their claims soon enough could be left with nothing, even if they have a strong case.
The FCA probe is due to conclude in September, but no date has yet been fixed as a cut-off for complaints.
What is the FCA investigating and who is eligible for compensation?
What is being investigated?
The FCA announced in January that it would investigate allegations of “widespread misconduct” related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers – usually the finance arm of a dealership.
These brokers earn money in the form of commission – a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
Martin explained: “We won’t know until the FCA’s ruling due in September.
“And it’s because we don’t know what the FCA will say in September that eligible people should look at logging a complaint sooner not later – as the unknown means there’s the risk people may be ineligible if they wait to claim.
“The regulator’s own website information indicates timing may be an issue and says ‘so, if you think you could be running out of time, you should consider complaining to your provider now’.”
Finance providers usually have eight weeks to issue a final response to a claim, but this requirement has been suspended while the investigation is carried out.
The FCA says that anyone who receives a final response to their complaint from July 12 2023 up to November 20 2024 will have 15 months rather than the usual six to appeal the decision to the Financial Ombudsman.
Based on that, the final appeals could still be considered well into 2026.
However, it’s best to get your claim in now ahead of the FCA’s report on September 25 to give yourself the best chance.
Just bear in mind that any complaint submitted before that date will not receive a final response until after the regulator releases its findings.
You can use the free tool on MoneySavingExpert to see if you may be eligible and to draft a claim letter.
It comes after Martin was left “staggered” when the tool was used more than a million times in just over a month.
He added: “The number 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.”
Meanwhile, the money whizz also warned of firms’ “fob off” tactics as he walked motorists through the next four stages of the process.
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