An investigation into car finance commission fees highlighted by money expert Martin Lewis could have “huge ramifications” for consumers, according to a leading expert.
The Financial Conduct Authority (FCA) is looking into “widespread misconduct” in the motor finance industry after an increase in complaints.
Paul Daly, Director of InsureDaily.co.uk, believes motorists could be set to receive “payback claims” once the probe has been concluded.
It is believed the investigation will wrap up by September meaning road users could receive extra cash later this year.
Speaking exclusively to Express.co.uk, Paul said: “The current investigation by the FCA into the terms of motor finance agreements could have huge ramifications for the industry and consumers alike.”
The FCA study was launched after the Financial Ombudsman Service considered some complaints rejected by finance firms.
The group found in favour of motorists in two recent decisions with the FCA warning this could spark a “significant increase” in complaints.
Explaining the situation, Paul said: “Prior to January 28, 2021, lenders and car dealers often had a commission clause in their agreement whereby the dealership would earn more money for charging the consumer a higher rate of interest on their finance agreement.
“This was deemed to be unfair on the consumer and since banned as a result, but some upheld complaints from before this date may lead to a flood of complaints of millions of customers who were sold a car on a finance agreement prior to 2021.
“If this is a case that the FCA deems that companies are dealing with unfairly, by incorrectly dismissing consumer’s complaints it could lead to payback claims at the same height of the mis-selling of PPI.”
Martin Lewis has also stressed payouts could be on the level of PPI with thousands of complaints already lodged.
In the first 24 hours, more than 260,000 complaint letters were filed through his MoneySavingExpert website.
Early predictions have estimated that 40 percent of complainants could be offered compensation of around £1,100.
This means that lenders are looking set to fork out a staggering £115million in compensation already.
Although details on payouts have yet to emerge, the FCA has stressed motorists will receive “an appropriate settlement” after their study has concluded.
