7 minute read

Elevated and inequitable interest rates, concealed commission charges, and the absence of proper affordability assessments stand as stark examples of the tactics employed by unethical lenders to take advantage of those looking to purchase a vehicle.

How can we prevent them from continuing these harmful actions and damaging consumers’ trust in the car finance industry? The solution lies in pursuing Car Finance Claims.

How Car Finance Claims Will Keep Lenders Accountable

Car finance claims are crucial in holding dishonest companies accountable. They provide those seeking financing a voice against abusive practices. Consumers create a support network by going after companies that use these tricks and raise society’s awareness of the problem.

Moreover, filing a claim against a lender can lead to legal scrutiny of their practices. Courts and regulatory bodies can impose fines, demand compensation for affected consumers, and even revoke licenses in extreme cases. The threat of legal consequences serves as a deterrent against unethical behaviour.

Car finance claims often require investigation by regulatory bodies, which can lead to increased monitoring of the entire industry. These investigations can uncover systemic issues and lead to broader regulatory reforms, ensuring all lenders adhere to fair practices.

It’s also important to highlight that lenders are conscious of their reputation in the market. Companies sued for abusive practices against their clients have their reputations significantly damaged, which requires them to correct their course. They are forced to come forward to explain what happened and what they will do to ensure that unethical and potentially illegal activity ceases. In a competitive market, reputation can be a significant asset or liability, incentivising lenders to act ethically.

The financial ramifications of car finance claims, including compensation payouts and legal costs, directly affect lenders’ bottom line. The potential for economic loss can be a powerful motivator for companies to maintain fair lending standards to avoid lawsuits.

In March 2024, Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), delivered a speech at the Morgan Stanley European Financials Conference in London. The speech focused on adopting a ‘regulatory approach to deliver for consumers, markets and competitiveness’. As part of the speech, Rathi talked about the ongoing car finance claims situation. He mentioned how the regulator is aiming to “act proactively and thoroughly understand the problem” with the hope of achieving “earlier clarity than previous redress events.” It is noted that “the more quickly and comprehensively firms cooperate with requests for data, the sooner we [FCA] can conclude our work.” Rathi concluded by stating he expects it will be ‘improbable’ that the FCA finds nothing to report following their investigation.

“While certainty is not something I can provide today, and I cannot prejudge what we might find, I can say in my view it is improbable we will find nothing to report as we look at historic motor finance sales. Some firms will be better placed than others. Equally, I do not anticipate this issue playing out as PPI did, not least because we have intervened early in the interests of market orderliness.” – Nikhil Rathi, FCA, Chief Executive

When Can You Make a Car Finance Claim?

In a nutshell, whenever you suspect that the lender was not honest when they sold you the finance agreement. Here are some situations where you can make a car finance claim:

  • Mis-sold Finance: If the credit was not suitable for your needs or financial situation, and this was not adequately assessed or explained to you, you might have grounds for a claim. This includes not being fully informed about the offer’s interest rates, terms, or total cost.
  • Lack of Affordability Checks: Lenders must conduct affordability checks to ensure the consumer can comfortably meet the payment obligations. If they failed to perform these checks properly, leading you into financial distress, you may be eligible for a claim.
  • High and Unfair Interest Rates: In case interest rates applied to your car finance are excessively high compared to the market rate at the time of the agreement, and you were not properly informed about this, you may be able to claim, particularly if your credit risk did not justify the high rates.
  • Undisclosed Commission Fees: Should the commission earned by the lender or broker from selling you the credit product have unjustly biased their recommendation, then you may have grounds to sue.
  • Incorrect Information or Misrepresentation: If you were provided with inaccurate information or the terms and conditions of the loan were misrepresented to you, leading to an unsuitable agreement, this could warrant a claim.
  • Early Settlement Issues: If you were penalised for settling your loan early or were not informed about your rights and the process for early settlement, you might be eligible to make a claim.
  • Voluntary Termination Rights: Under certain agreements, you can return the vehicle and terminate the agreement after paying off a specific portion of the loan. If these rights were not clearly explained to you, or you were obstructed in exercising them, you may have grounds for a claim.

How Long Does the Claims Process Take?

The claims sector has many variables at play, and it can be a very complex industry, so the length of a claim can vary. As of early 2024, the Financial Conduct Authority (FCA) is investigating the mis-selling scandal within the car finance industry. The current timeframe is that the FCA expects that they will complete their investigation in September 2024. When the investigation closes, they will announce their next steps, which may involve implementing a redress scheme. If they rule that consumers have been mis-sold, this scheme will outline how much compensation will be awarded and how it will be paid to consumers. However, until then, a lot is unknown, and we won’t know much about the next steps until September. We estimate that it could take between three to six months for claims to be processed after the redress scheme is confirmed.

There is no set deadline for submitting your car finance claim. If the FCA announces a redress scheme, they may also confirm a time limit by which people must put in a claim. It’s highly recommended that you submit your claim as early as possible. Lenders will likely have to deal with large volumes of car finance claims, so you will avoid delays and be placed higher on the list if you start your claim today. Once your details are registered, you can sit back and wait in peace until the FCA announces the next steps later this year.

A Timeline of Key Events

The car finance claims scandal is a long-running saga, with mis-selling believed to have taken place as early as 2007. Seventeen years later, 2024 is becoming a significant year with a resolution in sight. We’ve recapped key events below to help you understand the scandal’s history.

  • April 2007: While knowledge of mis-sold car finance has only surfaced recently, consumers may have been mis-sold on their agreements as far back as April 2007. The Financial Ombudsman Service didn’t take control of motor finance complaints until 6 April 2007, so you cannot claim for agreements before this date.
  • January 2021: In January 2021, the FCA banned the use of discretionary commission arrangements, preventing dealers or brokers from setting higher interest rates for higher commissions. Along with this ban, the FCA asked lenders to review their practices and address any identified issues.
  • January 2024: The FCA announced a major investigation into commission arrangements due to a large volume of rejected consumer complaints. The 8-week deadline for providers to respond to these complaints has been paused while the FCA conducts its investigation. The FCA aims to assess the extent of the problem and ensure consumers get compensation in the “best way possible” if they have been missold.
  • February 2024: Lloyds, which owns the Black Horse finance provider, became the first bank to set aside money as part of the probe. The company has set aside ¬£450m, which will be used to cover the potential costs of compensation pending the FCA’s findings.
  • ¬†September 2024: The FCA is expected to conclude its investigation into mis-sold car finance involving discretionary commission arrangements by the end of September 2024. If they determine that consumers have been mis-sold and are entitled to compensation, they are likely to announce a redress scheme that will payout affected consumers.

Will Making a Claim Have Any Negative Effects?

We know that people often have doubts about whether they should make a claim against financial mis-selling for various reasons, such as thinking it would be a waste of time or worrying about negative consequences. Firstly, consumers might not believe they have a case or lack awareness about how mis-selling has occurred. However, by going to a claims management company, you will receive comprehensive advice about your situation and how you have been affected. Similarly, many are worried about the costs involved. But you won’t be charged a penny unless your case is successful because of our No Win, No Fee service. Therefore, you can submit a claim knowing you won’t pay our fees unless you get your PCP finance compensation.

Another reason people delay claiming is that they believe it will take more time and effort than it’s worth. While the claims process can sometimes be lengthy and complex, the FCA is currently investigating car finance claims, a well-known scandal in recent news, and an update is expected in September 2024. One of the benefits of choosing a claims management company is that they will deal with all the paperwork and evidence needed to submit your claim, removing any unnecessary stress, effort, or time constraints on your part. There is also often a social stigma attached to making a claim, but if you were mis-sold, it’s worth fighting to get your money back, win a bit of justice and prevent them from mis-selling to other consumers.

Finally, you might be worried about whether submitting a car finance claim will negatively affect your relationships with your current or future lenders. It is not the case that you will be blacklisted for claiming. While this could have happened in the early 2000s, it has since been outlawed, and lenders are not allowed to blacklist you or treat you worse because you complained. Likewise, your claim won’t be included in a product application assessment, so won’t affect your chances of purchasing from a different lender in the future.

Ultimately, car finance mis-selling isn’t a victimless scandal. Millions of motorists have lost money due to mis-selling, and we strongly believe in helping them recover their money. The benefits of claiming far outweigh any negatives.

How to Start Your Car Finance Claim

If you find yourself in any of these situations, the first step is usually to contact your credit provider to discuss the issue. If dissatisfied with their response, you can escalate your claim through formal complaint channels, such as the Financial Ombudsman Service in the UK, or talk to our team to understand your options and the best course of action.

Remember, specific terms and conditions of your agreement and the laws of your jurisdiction will impact your ability to make a complaint. Use our free eligibility checker to see if you can claim. The check takes less than two minutes.

Car finance claims are pivotal in maintaining industry integrity, protecting consumer interests, and ensuring that lenders who engage in unethical practices are held accountable. The process seeks to rectify individual grievances and foster a fairer, more transparent car finance industry.