Consumers have been advised to steer clear of firms offering to help with car finance claims. The Financial Conduct Authority (FCA) has warned motorists that there have been a high number of complaints from people who have used the services only to find that they are forced to hand over a large portion of their award.
In January 2021, the FCA banned ‘discretionary commission arrangements’ (DCAs), which allowed dealers to increase interest rates on car finance in order to inflate the commission they would subsequently receive. Last year, the Court of Appeal ruled that a car sales firm couldn’t lawfully receive commission from a finance firm unless it had the customer’s “fully informed consent”. The FCA is now consulting on “an industry-wide redress scheme”, which could see those who took out car finance but did not give their consent to commission, potentially owed billions of pounds in damages.
The potential vast sums in awards have led opportunistic companies to try to operate on behalf of claimants.
However, the FCA warns that for many, using the help of a third party on a commission basis could see them unnecessarily lose large chunks of their damages.
They said: “Consumers should be aware that by signing up now with a CMC or law firm, they may end up paying for a service they do not need and having to pay up to 30% in fees out of any award they may receive.”
This is supported by the website Moneysavingexpert.com, which has created a free-to-use tool to help claimants compose free car finance discretionary commission tool & template letters.
The Supreme Court will make its final decision next month as to whether “discretionary commission arrangements” (DCAs) were illegal in the first instance.
The FCA says that it is “speaking with consumer groups, firms and industry trade bodies to get their views on important issues to consider if we do introduce a redress scheme.”
They added: “If we do decide to propose a redress scheme, we’ll publish a consultation setting out why we think it’s the right thing to do and how it could work.
“It’s not possible to predict the outcome of the Supreme Court’s judgment, but we’re engaging with stakeholders now and providing this update because we want to be able to act as quickly as possible once the Supreme Court has made its judgment, so we can start to bring greater certainty for affected consumers, firms and investors.”