A Bad Deal For Drivers
You may be due £1000 compensation on your car finance deal, says Paul Lewis.
If you bought a vehicle on finance from a dealer before 28 January 2021, you were probably charged too much interest – and you can claim it back. The average payout will be more than £1,000, and campaigners say it could be two or three times as much. Analysts estimate that claims could cost banks at least £8 billion.
Compensation is due because the banks that arranged finance over-charged customers so they could increase commission to dealers and make more profit themselves. The bank set the lowest rate of interest it would charge a customer but the dealer was free to put a higher rate in the contract; the higher it was, the more commission the bank paid. Win-win – except for the customer. The Financial Conduct Authority estimated these discretionary commission arrangements made £500 million a year for dealers and banks by overcharging an average of £1,100, and it banned them from 28 January 2021.
Save money by comparing car insurance quotes today
Many customers who complained about this found their claims turned down. But in January this year the Financial Ombudsman Service upheld two key claims against Barclays Partner Finance and Black Horse. The next day the FCA announced it would review motor finance commission arrangements, and says it is “urgently assessing” whether redress may be due to people who were secretly over-charged on their loans, and if so, how it should be paid.
If you bought a vehicle on a personal contract purchase or hire purchase before 28 January 2021, put in a claim to the dealer and the bank that lent you the money. Say that you believe they took part in a discretionary commission arrangement that was not disclosed to you and as a result of that arrangement you were overcharged. Ask for compensation and interest on it from the date of the overcharging. The FCA has given firms until 24 November this year to respond. If your claim is refused you will have up to 15 months to take your complaint to the Ombudsman.
To make this complaint you don’t need a claims management firm – which would take 40% of your redress! For more information, search fca.org.uk for “car finance complaints”.
QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com. I cannot answer you personally, but I will reflect them in this column.
Request a brochure - Age Partnership - find out if equity release could be right for you