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| What's behind car finance mis-selling complaints? | What's behind car finance mis-selling complaints? |
| (4 days later) | |
| People mis-sold finance agreements when buying cars could wait months for a decision on whether they should receive compensation. | People mis-sold finance agreements when buying cars could wait months for a decision on whether they should receive compensation. |
| A decision by judges at the Court of Appeal has blown open an ongoing saga into hidden commission payments, with buyers possibly in line for payouts totalling billions of pounds. | A decision by judges at the Court of Appeal has blown open an ongoing saga into hidden commission payments, with buyers possibly in line for payouts totalling billions of pounds. |
| But the higher Supreme Court has now agreed to hear an appeal against the decision. | |
| The Financial Conduct Authority (FCA) has also given more detail about plans to allow dealers extra time to deal with complaints. | |
| It is consulting on two options, either extending the deadline to the end of May or until December 2025. | It is consulting on two options, either extending the deadline to the end of May or until December 2025. |
| Lawyers acting for motorists say this could further delay compensation which should be paid to car buyers who may not have given their informed consent for the commission payments. | Lawyers acting for motorists say this could further delay compensation which should be paid to car buyers who may not have given their informed consent for the commission payments. |
| Who may be in line for payouts? | Who may be in line for payouts? |
| The vast majority of new cars, and many second-hand ones, are bought with finance agreements. | The vast majority of new cars, and many second-hand ones, are bought with finance agreements. |
| About two million are sold this way each year, with customers paying an initial deposit, then a monthly fee with interest for the vehicle. | About two million are sold this way each year, with customers paying an initial deposit, then a monthly fee with interest for the vehicle. |
| In a complicated, and long-running, series of developments, many of these agreements have come under scrutiny. | In a complicated, and long-running, series of developments, many of these agreements have come under scrutiny. |
| In 2021, the FCA banned deals in which the dealer received a commission from the lender, based on the interest rate charged to the customer. It said this provided an incentive for a buyer to be charged a higher-than-necessary interest rate. | |
| Since January, it has been considering whether compensation should be paid to people with these deals before 2021. | Since January, it has been considering whether compensation should be paid to people with these deals before 2021. |
| That has created the prospect of banks and other lenders having to make payouts totalling millions of pounds. | That has created the prospect of banks and other lenders having to make payouts totalling millions of pounds. |
| Last month, a decision at the Court of Appeal broadened the net of those who could receive compensation, potentially increasing the lenders' final bill to billions of pounds. | Last month, a decision at the Court of Appeal broadened the net of those who could receive compensation, potentially increasing the lenders' final bill to billions of pounds. |
| Why was the judges' decision so important? | Why was the judges' decision so important? |
| While the initial investigations surrounded discretionary commission arrangements, which were banned in 2021, the Court of Appeal decision widened the scope to any car finance commissions. | While the initial investigations surrounded discretionary commission arrangements, which were banned in 2021, the Court of Appeal decision widened the scope to any car finance commissions. |
| The three judges unanimously agreed that it would be illegal for the lender to pay any commission to the dealer without the informed consent of the buyer. | The three judges unanimously agreed that it would be illegal for the lender to pay any commission to the dealer without the informed consent of the buyer. |
| In other words, customers should be clearly told how much commission would be paid, and agree to it, without those details being buried in the terms and conditions of the loan. | In other words, customers should be clearly told how much commission would be paid, and agree to it, without those details being buried in the terms and conditions of the loan. |
| The test case involved Marcus Johnson, 34, who bought a Suzuki Swift | The test case involved Marcus Johnson, 34, who bought a Suzuki Swift |
| The hearing included the test case of Marcus Johnson, 34, from Cwmbran, Torfaen, who bought his first car - a Suzuki Swift - in 2017. | The hearing included the test case of Marcus Johnson, 34, from Cwmbran, Torfaen, who bought his first car - a Suzuki Swift - in 2017. |
| He was not informed the car dealership was being paid 25% commission, which was added on to what he had to pay back. | He was not informed the car dealership was being paid 25% commission, which was added on to what he had to pay back. |
| "I signed a few documents and then drove away in the car," he told the BBC. | "I signed a few documents and then drove away in the car," he told the BBC. |
| He said he had no option but to use finance when he bought the car, describing it as "heartbreaking" to find out so much extra money had been taken. | He said he had no option but to use finance when he bought the car, describing it as "heartbreaking" to find out so much extra money had been taken. |
| "Someone in my situation at that time, not being able to buy that kind of age car with cash, you would use finance," he said. | "Someone in my situation at that time, not being able to buy that kind of age car with cash, you would use finance," he said. |
| Following the judges decision in his - and two other car buyers' - favour, banks have set aside millions of pounds for potential compensation. Other lenders have temporarily paused any new deals. | Following the judges decision in his - and two other car buyers' - favour, banks have set aside millions of pounds for potential compensation. Other lenders have temporarily paused any new deals. |
| It's thought the total cost of compensation could reach £25bn, according to analysts. | |
| How has the regulator responded? | How has the regulator responded? |
| The FCA said that the decision could lead to dealers receiving a deluge of new complaints. | The FCA said that the decision could lead to dealers receiving a deluge of new complaints. |
| Some could come from people previously told they had no claim for compensation because they did not have a discretionary commission arrangement. | Some could come from people previously told they had no claim for compensation because they did not have a discretionary commission arrangement. |
| The regulator is consulting on extending the time car dealers will have to respond to complaints. | The regulator is consulting on extending the time car dealers will have to respond to complaints. |
| The two options are: | The two options are: |
| Giving dealers until the end of May to deal with complaints | Giving dealers until the end of May to deal with complaints |
| Allowing them until December 2025 to respond, to align the deadline for firms to deal with discretionary and non-discretionary arrangement complaints | Allowing them until December 2025 to respond, to align the deadline for firms to deal with discretionary and non-discretionary arrangement complaints |
| It also wants the Supreme Court to make a quick decision when it reconsiders the Court of Appeal's ruling. | |
| It wants an orderly compensation system, if it comes to that. | It wants an orderly compensation system, if it comes to that. |
| The Finance and Leasing Association, the trade body for motor finance providers, described the FCA's plan as a "sensible move". | The Finance and Leasing Association, the trade body for motor finance providers, described the FCA's plan as a "sensible move". |
| However, others have questioned whether it creates a further compensation delay for those who were mis-sold these agreements. | However, others have questioned whether it creates a further compensation delay for those who were mis-sold these agreements. |
| Get in touch | Get in touch |
| Have you been turned down for compensation relating to a car finance deal? Share your experiences. | Have you been turned down for compensation relating to a car finance deal? Share your experiences. |