If you’re one of the 80% to 90% of UK car owners who financed your vehicle, you need to pay close attention. According to Martin Lewis, the founder of Money Saving Expert, you could be owed thousands of pounds.
Back in January, the Financial Conduct Authority (FCA) launched an investigation into potential mis-selling of Discretionary Commission Arrangements (DCAs) in car finance policies. While a final ruling won’t be made until May 2025, Lewis believes the scrutiny is leading to more successful compensation claims for customers who unknowingly overpaid.
This could be a major financial windfall for millions across the UK. Lewis calls it ‘the new PPI’, referencing the Payment Protection Insurance scandal, with an average payout estimated at £1,100.
Who could be eligible?
You may be eligible for compensation if you bought a van, campervan, or motorbike on finance between April 2007 and January 28, 2021, provided the vehicle was for personal use and financed through a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement.
Between 40% and 74% of car finance policies taken out during this period included DCAs. These arrangements allowed finance firms to increase interest rates at any time without notifying the customer, while dealers and brokers earned hefty commissions tied to the interest paid.
Although DCAs have since been banned, those who had one prior to the ban and weren’t made aware of its implications may have been unfairly charged. The only way to know is to file a complaint.
How to take action
Martin Lewis urges car owners to use Money Saving Expert’s free tool to file a complaint and to avoid ‘no win, no fee’ services that could take 50% of any payout. He believes a time limit for claims may be introduced once the FCA’s investigation closes, meaning only those who complained before that date will be eligible for compensation.
‘The key is to get a complaint in ASAP,’ he states in his latest newsletter. ‘The sooner you log a complaint, the less chance you’ll be excluded.’
Since MSE launched their tool in February, a staggering 2.3 million complaint letters have been sent.
Important points to remember
* The refund rules apply even if the original car owner has passed away, as the relevant executor or beneficiary can claim on their behalf.
* Even if you’ve already paid off the vehicle or no longer own it, you can still make a claim and get your money back.
