Car dealers to be ‘inundated’ with compensation claims after Martin Lewis show on motor finance

  • Money saving expert Martin Lewis releases show on unfolding motor finance
  • ITV consumer show explores ongoing FCA investigation into automotive lenders
  • Firms are alleged to have mis-sold finance deals using ‘discretionary commission arrangements’
  • One retailer tells car dealer ‘we’re going to be inundated with claims now’

Time 8:43 am, February 7, 2024

Car dealers up and down the country are set to be ‘inundated’ with claims for compensation after an ITV documentary into ‘hidden and unfair’ car finance commissions.

Car Dealer reported last month that the Financial Conduct Authority (FCA) is investigating cases of finance houses not paying out compensation to customers over now-banned ‘discretionary commission arrangements’.

The watchdog is using its powers under S166 of the Financial Services and Markets Act 2000 to identify cases of potential wrongdoing by motor finance firms.

On a recent episode of the Car Dealer Podcast, Motor Connect director Steve Corwood warned that the investigation could be the ‘next big PPI scandal’ and it that is an opinion shared by one of the country’s best-known consumer champions.

Last night (Feb 6), ITV aired a special one hour episode of the Martin Lewis Money Show, in which the host said the ongoing investigation is likely to end up being ‘the UK’s second biggest reclaim ever, after PPI’.

The money saving expert told viewers that anyone who bought a car, van, campervan or motorbike on finance before January 28, 2021, could be entitled to compensation, with the bill set to run to billions.

He also said that ‘lenders let brokers and car dealers make up interest rates to increase their commission’ resulting in ‘millions overpaying without knowing it’.

It is estimated that around 40% of finance sales prior to the January 2021 were sold using the discretionary arrangements.

Speaking about the ongoing FCA investigation, which is due to last until September 25, Lewis said: ‘My view on this is I don’t believe it [the FCA] would have launched this investigation unless it already had substantial evidence and the likelihood is the investigation now is to make sure it’s got everything right so it can’t be judicial reviewed.

‘I think it is very very likely it is going to rule that there was seismic, systemic mis-selling.’

It comes after Car Dealer reported on January 18 that banks that lent money via motor finance could face total bill of £10bn.

In response to the unfolding scandal, Lewis has launched a free reclaim tool and guide, which explains to consumers how they can go about making a claim.

Lewis is now encouraging consumers to get their complaints in within the next few weeks, in order to have a ‘time stamped’ record.

It means motor traders are expecting a swathe of incoming claims, with one telling Car Dealer: ‘Martin opened the floodgates to claims with that show.

‘We’re going to be inundated with claims now. It’s going to be an interesting few days that’s for sure.’

The news may come as a worry to dealers, who could be fearing huge bills. However, automotive legal firm, Lawgistics, has moved to ease concerns.

John McDougall, the firm’s legal advisor, told Car Dealer: ‘Lawgistics’ position has alway been that the responsibility for these discretionary commission arrangements is the lender.

‘The dealers may see an increase in these types of complaints, however Martin Lewis has advised consumers to make their complaints to the lender.

‘Until the FCA provides an update in September we are all a little bit in the dark as to what the outcome will be. However, the lenders (Banks) will fight their corner on this as they do not want another PPI situation.’

In last night’s show, Lewis did indeed encourage viewers to complain to their lender, rather than car dealers. He name checked the likes of Barclays, Black Horse and Santander, but stressed that ‘way over 100 firms’ could be involved.

Meanwhile, Advantage Finance, First Response Finance, Oodle, Moneybarn, Specialist Motor Finance, Billing Finance and Lombard Mallard all denied ever using discretionary commission arrangements.

Dealers who are still concerned, can view Lawgistics’ handy online guide to the scandal.

You can watch the full ITV show here.

Main image: ITV

Jack Williams's avatar

Jack joined the Car Dealer team in 2021 as a staff writer. He previously worked as a national newspaper journalist for BNPS Press Agency. He has provided news and motoring stories for a number of national publications including The Sun, The Times and The Daily Mirror.

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