8:50 am, November 14, 2024
Money saving expert Martin Lewis has once again weighed into the car finance crisis, claiming that the scandal could be about to double in size.
The Financial Conduct Authority (FCA) yesterday announced that it is consulting on again extending the current pause in the time motor finance firms have to respond to customer complaints, this time in light of the recent Court of Appeal finance judgement.
In response to the news, Lewis said that he has been told that the body’s investigation has been extended to not only include deals which used now-banned banned discretionary commission arrangements, but all deals including fixed commissions.
Writing on X, formerly known as Twitter, the consumer champion said the news could more than double the number of people involved in any redress scheme.
The FCA has not commented on Lewis’s claims and did not mention any change in the scope of its investigation in yesterday’s announcement.
In a lengthy post, Lewis said the change could take the motor finance scandal closer to PPI levels and pose a ‘substantial threat’ to the motor finance industry.
‘Now most people who’ve had any type of it [car finance] are being urged to complain – doubling the numbers,’ he wrote.
‘While not specified in its announcement, I’ve had it confirmed this applies to ALL car finance commission complaints, not just the Discretionary Commission Arrangements (DCAs) complaints previously covered.
‘What this means: It signals that the FCA is paving the ground to in future broaden the scope of its car finance investigation, so not only at the 40% of past claims that had DCAs (where dealers could increase their commission by increasing interest) but all commissions including fixed commissions.
‘This is on the back of the Court of Appeal, which ruled “consumers need to know all material facts including the amount of commission” which they often weren’t told even in fixed commission cases.
‘It looks like (I need to dig) if the hold is extended, almost everyone who has had car finance deals may have a complaint (I need to examine timelines of what counts) and be potentially due money back (this includes those already rejected as they were told they ‘didn’t have a DCA’).
‘This potentially more than doubles the number of people involved, and would really start to look more like PPI scale of payouts (and a substantial threat to the car finance industry).’
HUGE CAR FINANCE NEWS: (pls share) Now most people who’ve had any type of it are being urged to complain – doubling the numbers.
Minutes ago, the regulator, The FCA, announced it’s consulting for two weeks (so quick, it’s a likely done deal) on extending the time firms have to…
— Martin Lewis (@MartinSLewis) November 13, 2024
Earlier this year, Lewis’s Money Saving Expert website launched its own car finance complaint tool, which was inundated with inquiries, following a special programme about car finance on ITV.
The financial journalist now says that the service is being ‘adapted’ in light of recent events and believes that motorists who have previously had a claim rejected, should probably consider trying again.
Probably. let us work through it and we will adapt the MSE tool appropriately, will take a couple of weeks until after consultation finsishes before you should do anything
— Martin Lewis (@MartinSLewis) November 13, 2024
The Finance Commission Story So Far
- FCA needs to answer serious questions over car finance Court of Appeal decision
- Car finance slowly starting up again as lenders change systems and some freeze commission payments
- Chaos: Car finance grinds to a halt in wake of Court of Appeal decision
- Close Brothers stops underwriting new dealer finance after court ruling
- FCA chief executive calls for clarity over motor finance judgement
- Car finance pauses as banks figure out legal implications – who has stopped lending?
- Honda ‘pulls car finance and delays customer handovers’
- FLA: Court of Appeal ruling was ‘very unexpected’ but ‘welcome’
- Could car finance commissions case become the next PPI ‘scandal’?
- Short-term headache or genuine game-changer? What mounting finance crisis means for dealers
- Banks face downgraded credit ratings as a result of car finance scandal
The FCA has been investigating the motor finance industry’s use of now banned discretionary commission arrangements (DCAs) since January.
The long-running pause has been put in place while the FCA decides to implement a formal redress scheme with the likes of Lloyds Banking Group and other lenders putting aside hundreds of millions of pounds to deal with compensation.
The scandal deepened last month when the Court of Appeal sided with consumers, who were complaining about finance packages supplied by Close Brothers and Firstrand Bank.
The court ruled that commissions car dealers received from brokers should be declared in full to customers, and that customers had time to consider the pay-outs.
The landmark decision saw lenders pause new finance business as the industry scrambled to understand the ruling with the Finance and Leasing Association saying that the FCA has ‘questions to answer’ over its handling of the situation.
Both Close Brothers and Firstrand Bank are expected to challenge the Court of Appeal Ruling at the Supreme Court.
