The Financial expert, Martin Lewis, advised the drivers who were mis-sold car loans, following a financial regulator’s declaration that the industry could pay out up to 18 bn in compensation.
The FCA (Financial Conduct Authority) is launching a compensation consultation for the drivers. The compensation consultation will determine how much to pay out to millions of drivers who paid more interest than they knew about.
Millions of people are denied the payouts following the Supreme Court ruling on 1 August that lenders are not liable for hidden commission payments for the car finance schemes. The decision means most of the claims will go ahead; however, only the most serious claims will be eligible for compensation.
Mr. Lewis explained that many cases in a separate strand regarding car finance mis-selling cases, which were not related to the Supreme Court ruling, are still eligible to receive payouts.
The Financial Expert, Mr. Lewis, explained that there are two strands of car finance mis-selling cases. DCAs (Discretionary Commission Arrangements, Mr. Lewis says that DCAs will be the main form of compensation to come out of the consultation. He said that DCAs were not involved in the Supreme Court case. DCAs were banned in January 2021, and DCAs saw dealers and brokers charge higher rates of interest so they could get more commission, without telling consumers.
The 13 bn figure is a significant fall from the 45 bn if the Supreme Court upheld the rule. The FCA said the final cost of the scheme would depend on its final design, making it difficult to estimate precisely.
Mr. Lewis notes that the people who had 0 percent interest, or whose commissions were very small, are less likely to receive the compensation. However, for most people, the amount of compensation will be in hundreds of pounds.
The other strand of the car finance mis-selling case is the one element of the Supreme Court case that was endorsed by the court, including the two others being dismissed.
For the people who are unsure whether they are eligible, Mr. Lewis advises putting in a complaint to see whether they had a DCA.
The FCA is advising customers who think they have paid too much must complain. Lenders will have to contact consumers, either automatically pay out customers, or the customers will have to opt into a compensation scheme. Mr. Lewis explained that receiving compensation will be very simple.
The FCA estimates that most people making claims will receive less than 950 pounds in compensation per agreement.
But, the Financial Guru warned that the industry could fight harder, while he urged the industry members to accept the fair compromise.
