Martin Lewis issues car finance update as thousands could be owed money back

Money-saving expert Martin Lewis has delivered a significant update for all motorists who have purchased vehicles on finance in recent years. The Financial Conduct Authority (FCA) initiated a comprehensive probe in January into concealed, unfair car finance commissions.

Essentially, drivers who utilised finance agreements to buy their cars between 2007 and 2021 might be eligible for an average reimbursement of £1,100. The FCA is examining a scheme known as Discretionary Commission Arrangements (DCA), which permitted those arranging car loans—including car dealers—to manipulate their customers' interest rates.

This practice meant that the more the interest rate was increased for the customer, the greater the commission received by the loan arranger—a tactic that was prohibited in 2021.

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However, an update posted on Money Saving Expert (MSE), the platform established by Martin Lewis, indicates that car finance mis-selling isn't just about DCAs anymore. The site clarifies: "Of the 99% of car finance deals with commission on them, only 40% had the Discretionary Commission Arrangements this guide is about."

It adds, "DCAs are the most likely route to get money back, so my best guess is to start with this guide, as the first check is to see if you had a DCA, which our free tool helps you do. Yet in October 2024 a landmark Court of Appeal ruling meant everyone who's had commission, of any type (not just DCAs), may be owed money back too.", reports the Mirror.

"So, if you're told you didn't have a DCA we've a new car finance commission disclosure guide and tool you may want to read after."

This means that millions more people could be in line for refunds on past car finance agreements. If you've previously been informed that your car finance deal was free of hidden DCAs, you might still be entitled to compensation.

While MSE acknowledges the situation is "uncertain situation" their guidance clarifies: "If you weren't told all the facts you needed to make an 'informed decision' on your car finance deal, including the type and amount of commission the dealer or broker was going to be paid, then it was a breach of the law. And as people were rarely told the commission amount, or how it was worked out, this opens the door to a large number of similar cases."

"This unexpected verdict sent shockwaves through the car finance industry, caused wobbles for regulators and reverberated right across the financial world. As it's a precedent-setting Common Law decision, that means right now it is the law in the UK."

"Yet an application for an appeal to be heard at the Supreme Court has already been put in, and it is almost certain to hear the case. It would not be unusual for the Supreme Court to have a starkly different view to the Court of Appeal and overrule it, thus in practice changing the law again. A decision needs to be made speedily, by spring 2025, so there's clarity, but there's no guarantee, and even then the fallout and any pay-outs will take time."

MSE is providing a free car finance commission tool and template letter, which requests some basic details and then compiles an email drafted by Martin, which has received feedback from lawyers and regulators. This letter can then be dispatched to car finance providers which may lead to a pay out.

For more information from MSE, visit their website.