CLAIMS lawyers are circling the motor finance market as the next big area of profit, says former finance brokers association chief Graham Hill.
The Financial Conduct Authority is due to complete its report into personal contract purchase (PCP) plans next month after it raised concerns about a lack of transparency, conflicts of interest and irresponsible lending by car dealers and lenders.
But ahead of its publication and as the deadline for claiming compensation on mis-sold payment protection insurance gets closer, Hill says that notable claims firms have already set their sights on PCP customers as they attempt to create legal benchmarks for future cases against car dealers or funders, seeing it as the next big area of profit.
The issues being explored by the FCA were first raised in 2016 and initially focused on how dealers were presenting the total cost of interest repayments over the term of the deal as well as the ‘equity’ buyers would have at the end of the deal.
While Hill, who is an ex-director and chairman of the National Association of Commercial Finance Brokers, believes that thousands of customers have grounds to explore the possibility that they were mis-sold PCPs, he says the arrival of opportunistic claims firms could see customers losing out on millions.
‘The claims industry that grew up around the PPI mis-selling scandal was never simply going to just fade away,’ he said.
‘These firms have now firmly set their sights on PCP customers as the next big cash cow. The hope among claims agents is that the FCA’s report next month kicks up enough dirt on poor selling practices among car dealers that ambulance-chasers can then set references – or even precedents – in court to legitimise their claims.
‘We’re already seeing these vultures getting ahead of the game and hosting pages on their sites encouraging customers to come forward if they think they have fallen foul of mis-selling.
‘Unfortunately, that’s to the detriment of customers who will end up parting with millions as these firms look to take a cut of the compensation payouts – whereas anything awarded by the Financial Ombudsman Service goes entirely to the customer.’
Hill added: ‘It’s important to note that while there are certainly plenty of examples of misrepresenting PCP deals, the product itself is a solid route to car ownership.
‘There’s a risk that by talking down the car finance market as a whole that consumers revert to financing vehicles outright from their own savings. This could ultimately stymie growth in the new car market as consumers steer towards cars – typically second-hand – they can buy from digging into their own savings.
‘It’s vital that the differentiation between the product itself and the possibility of mis-selling is made clearly.’