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How do car finance claims work?

An estimated 90% of all new cars in the UK are sold with personal contract purchase (PCP) or hire purchase (HP) finance, while a significant volume of the used car market also relies on these financing models.

An ongoing Financial Conduct Authority (FCA) investigation into car finance mis-selling has been described as a ticking time bomb that is set to explode – so let’s explore what car finance mis-selling is and how your potential claim would work.

What is car finance mis-selling?

What will likely eventually be described as a car finance mis-selling scandal centres on hidden commissions included in your monthly payments.

The FCA’s current investigation is focused primarily on car finance deals sold before 28th January 2021, when it banned discretionary commission arrangements (DCAs). Before this date, the regulator estimates that 95% of all car finance deals were sold with a commission model and that 40% included hidden commissions and interest inflation.

Mis-selling occurred because DCAs allowed the party helping to arrange your finance – usually the car dealer – to choose the interest rate you paid. The car dealer, or another party acting as a broker or intermediary, earned more commission the higher the interest rate. As such, you may have paid more than you needed throughout your finance deal.

Have you had car finance in the last six years?

While the FCA is investigating non-disclosure of commissions before the 2021 DCA ban, claims may eventually be accepted for car finance agreements dating back to 6th April 2007, when the Financial Ombudsman Service (FOS) took over jurisdiction of motor finance complaints. There are also concerns that car finance mis-selling via non-disclosure of commissions continued after the 2021 DCA ban.

If you’ve had car finance in the last six years, we can conduct a soft credit check to identify your agreements and let you know if you may be owed compensation.

If you had a car finance agreement more than six years ago or want us to look into several historical agreements, we may still be able to help. However, you’d need to still have all your paperwork and documents to enable us to conduct a proper review.

Complete our free car finance check

If you’ve had car finance in the last six years, you can check your car finance claim now.

It only takes a few minutes, and you do it all online. At this stage, you don’t need to call us or provide us with any further information.

What happens next

If we think you’re owed compensation, you can instruct us to pursue your claim on a no-win, no-fee basis.

When will my claim be processed?

We’ll get to work and write to your car finance lender immediately. Even if your car dealer or another intermediary arranged the finance deal, we’ll bring your claim against the company that ultimately provided the finance.

As of May 2024, the FCA has put a pause on firms responding to car finance mis-selling complaints while it completes its investigation. The regulator is due to report in September 2024, which is when responses to complaints should resume.

If you want to pursue a car finance mis-selling claim, it is best to do so as soon as possible.

This ensures your claim is “in the queue” come September, or even earlier if the FCA tells firms to continue responding to complaints. In some cases, your car finance lender may want a swift solution and could respond and agree to pay your compensation anyway. And finally, starting your claim also means you’re safe if the FCA announces in September that only claims already in the pipeline will be dealt with.

Check your car finance claim now.

How much compensation can I get?

If your car finance was mis-sold, your compensation award will depend on several factors, such as how much the car dealer or intermediary inflated your interest rate and payments.

However, the FCA estimated in 2019 that car finance mis-selling victims had overpaid, on average, £1,000 per agreement. This figure rose to £1,100 in January 2024 when the regulator started its investigation.

At LawPlus Solicitors, we’re seeing an average compensation award of £1,500 per agreement for our clients.

Start your claim now with LawPlus Solicitors

Getting your car finance mis-selling compensation with LawPlus Solicitors couldn’t be simpler.

If you’ve had car finance in the past six years, check your claim online and let’s get things moving!

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