The Financial Conduct Authority’s (FCA) said it has given car dealerships which mis-sold loans to unsuspecting British motorists more time to deal with complaints.
It is believed that millions of buyers could receive hundreds of pounds in payouts which could total around £30bn.
Complaints involve the sale of car finance which had a hidden clause – known as Discretionary Commission Arrangements (DCAs).
These DCAs meant dealers could increase the interest rate on the loan, which meant their commission – which is linked to the lending would then increase.
In October a ruling by judges at the Court of Appeal meant more drivers may be due compensation. As a result the Financial Conduct Authority (FCA) said it was extending a deadline for dealing with complaints to the end of May or until December 2025.
Figures released by the Finance & Leasing Association (FLA) showed that nearly 2.1 million new and used cars were bought using some finance in the year ending October 2024.
In 2021, finance which involved paying commission to a dealer based on the interest rate charged to the customer were banned.
This was because the FCA felt it provided an incentive for a buyer to be charged a higher than necessary interest rate. Early this year FCA had also been considering whether compensation should be paid to people who took out these deals before 2021.
It was backed up by the Court of Appeal’s decision and means more people drivers may be in line for a payout. However car dealerships will need to be given more time to deal with the extra complaints.
Banks and lenders have set aside money for potential compensation payouts with finance guru Martin Lewis describing it as the new PPI.
He said some drivers had been paying 25 per cent commission added onto finance deals with little knowledge of the extra fees.
Lewis said that the FCA ruling will mean that lenders will have look at complaints but will not have to make a decision.
If you think you were mis-sold car finance, and paid increased commision without knowing MoneySavingExpert has an online reclaim finance checker.
There is also free advice on how to complain about mis-sold car finance on the Gov.uk MoneyHelper website.
