MoneySavingExpert car finance alert as drivers could be 'owed £1,000s'

Vehicle owners could be owed cash following an alert about 'mis-sold' car finance

An alert has been issued to anyone who used car finance between April 2007 and January 2021. Some people may have been 'mis-sold' the service and as a result could be owed £1,000s, according to experts at Martin Lewis' MoneySavingExpert (MSE).

It comes after the Financial Conduct Authority (FCA) launched an investigation into car financing earlier this year which is assessing whether customers have been charged too much interest on loans. Its next update is due to be published in May 2025 but vehicle owners can still make a complaint claim today.

A spokesperson for MSE wrote: "Our car finance reclaiming guide takes you through it step-by-step, but in a nutshell, you may be able to claim £1,000s back due to HIDDEN Discretionary Commission Arrangements (DCAs) on your policy. These DCAs are where finance firms let car dealers pump up interest rates, without customers being told, and then bunged 'em extra commission if they did.

READ MORE: The scandalous truth about Birmingham's child poverty emergency laid bare

"This likely meant many OVERPAID WITHOUT KNOWING and may be due a predicted average £1,100 back." If you are unsure whether a DCA was in your policy the do not worry. The complaints procedure only considers two types of finance taken over the 14-year period which encompasses Personal Contract Purchase (PCP) and Hire Purchase (HP), but leasing is not included, The Mirror reports.

The experts stress that only vehicles used for personal use and commuting are part of this, with business cars and static caravans are excluded. Claims can even be made on the behalf of someone whose passed away, or for a vehicle that's no longer in your ownership.

If you think you tick these boxes, MSE then encourages you to use its online tool that formally asks your finance firm whether a policy implemented used a DCA. Providing the answer is yes, it'll then automatically log a formal complaint.

MSE claims that 74 per cent of those who have previously used this tool have discovered they had a DCA. However, prospective complainants are advised to be quick.

When the update arrives in May 2025, MSE speculates that there may be a 'time bar' introduced, preventing some people from claiming back after a certain period. The FCA also explains: "Before January 2021, some lenders allowed brokers (the person that arranges your loan, for example, your car dealer) to adjust the interest rates they offered customers for car finance.

"The higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement (DCA). And it may have been applied to your loan without you knowing.

"DCAs created an incentive for brokers to increase how much people were charged for their car loan. We banned this practice in 2021. But there have since been a high number of complaints from customers about how much they were charged before the ban. Providers are rejecting most of these complaints, because they believe they haven’t acted unfairly and haven’t caused customers to lose out.

"We’re reviewing the issue to make sure that, if you're owed compensation, you get it in the best way possible."

Click here to view the MSE website.

Birmingham: A Child Poverty Emergency

Child poverty is soaring in Birmingham and without urgent change, will only get worse. Having worked with charities and community groups, BirminghamLive is campaigning for the following changes to start to turn the tide:

1. End the two-child benefit cap
2. Provide free school meals to every child in poverty
3. Create a city “aid bank” for baby and child essentials
4. Protect children’s and youth services
5. Create permanent, multi year Household Support Fund and give more Discretionary Housing grants
6. Set up child health and wellbeing hubs in our most deprived neighbourhoods
7. Appoint a Birmingham child poverty tsar
8. Provide free public travel for young people

You can see why in more detail here.

Read our full report Birmingham: A Child Poverty Emergency here.

What you can do to help.