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Watchdog to investigate compensation over car loans

2024-01-11 00:00:00.0 英国广播公司-商业新闻原网页

Image source, Getty Images

By Kevin Peachey

Cost of living correspondent

The City regulator will review whether people who believe they were charged too much for car loans are owed compensation.

The Financial Conduct Authority (FCA) has stepped in to avoid a chaotic run of complaints from car-buyers.

About 10,000 people have made complaints to an ombudsman with "many more waiting in the wings".

The cases surround commission arrangements between lenders and car dealers.

Some lenders had allowed dealers to adjust interest rates, which would improve the commission they received.

As a result, these arrangements created an incentive for brokers to increase how much people were charged for their car loan.

In 2021, the FCA banned these discretionary commission arrangements, following a review, claiming it would collectively save drivers ￡165m a year.

'Outrageous' car loan commission banned

However, it said there had been a high number of complaints from customers to motor finance firms, claiming compensation for commission arrangements before the ban.

The Financial Ombudsman has upheld two complaints in favour of customers, as have some cases in the county courts, which are expected to lead to a host of new claims.

"We've heard from more than 10,000 people who fear they were charged too much for their finance, and we know many more are waiting in the wings," said chief financial ombudsman, Abby Thomas.

To avoid "disorderly, inconsistent and inefficient" results for consumers and the sector becoming overwhelmed, the FCA has stepped in to pause the process and investigate.

"If we find widespread misconduct, we will act to make sure people are compensated in an orderly, consistent and efficient way," said Sheldon Mills, executive director at the FCA.

The pause, which started on Thursday, applies to complaints about motor finance agreements where there was a discretionary commission arrangement between the lender and the broker and will last for 37 weeks, or around nine months.

It will apply to complaints received by firms on or after 17 November last year, and on or before 25 September this year.

Consumers may also have up to 15 months to refer their complaint to the ombudsman, rather than the usual six months, depending on when the firm's final response was sent out.