CASHING IN
I took on car loan giants and WON – I pocketed £600 from finance mis-selling scandal but you could take home even more
Find out if you're eligible and how long you have to claim
A DRIVER has revealed how he won £600 back from car loan giants after bringing a landmark case in the finance mis-selling scandal.
Experts have estimated that Brits could be due billions in compensation in a payout that would "dwarf" the PPI saga.
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The Financial Conduct Authority (FCA) launched an investigation last year into the use of dodgy commission arrangements that saw customers overpaying hugely on their loans.
The practice was banned in 2021, but the FCA is now looking into whether a compensation scheme should be set up to redress the costs borne by drivers since at least 2014, when the scandal was first brought to light.
One such driver was Staffordshire postman Andrew Wrench, who has just won a major case at the Court of Appeal.
The enthusiastic petrolhead, 60, made claims against a pair of convertible sports cars he picked up as "impulse purchases" years ago.
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He admitted that he had not read all the paperwork associated with each sale, but noted that there had been some reluctance by dealerships to let him pay in cash.
He was furious, therefore, when he discovered that each of the contracts included a clause allowing the dealer to earn commission based on the interest rate attached to the loan.
What is the FCA investigating and who is eligible for compensation?
By Jacob Jaffa, Motors Reporter
What is being investigated?
The FCA announced in January that it would investigate allegations of "widespread misconduct" related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers - usually the finance arm of a dealership.
These brokers earn money in the form of commission - a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
It is this practice that is now being scrutinised, as critics claim that salespeople were incentivised to place customers on the highest rate in order to secure the maximum commission.
Mr Wrench and his legal team brought one of a package of cases focussing on this issue that were decided by the Court of Appeal last month.
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They alleged that drivers like Mr Wrench were not adequately informed of the commission arrangement and therefore could not give proper informed consent to the deal.
He told : "The dealers were desperate for me to sign up to loans.
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"I wanted to pay in cash, but they were not interested – and I should have smelt a rat at the time.
"Being told I could drive the car away that day swung the deal.
"At no point was there a mention of commission.
"The judges at the appeal asked the lender if I was a magician – because the mention of any commission was so well hidden within the contract."
And, in a landmark ruling, the court sided with Andrew and awarded him £600 in compensation.
If there was a decision to pay people out automatically for this then the scale would be enormous.
Coby Benson
However, the really important part of the decision is that it set the legal precedent that such commission arrangements can be grounds for compensation dating back years.
It also expanded the scope to more forms of commission, not just DCAs.
Almost 85% of new car deals are done on finance according to the latest figures from the SMMT, with similar figures seen every year for the past decade.
Experts, including Martin Lewis, have estimated that millions of Brits were likely affected by these deals and could be entitled to an average payout of over £1,000 per car.
Coby Benson, a lawyer from the firm that brought the case which prompted the FCA probe, told SunMotors that the scandal is set to be the "next PPI".
He said: "If there was a decision to pay people out automatically for this then the scale would be enormous.
"Like only surpassed by PPI, in which tens of billions were recovered.
";Here, it would also be billions of pounds."
And new figures revealed to SunMotors by Sentinel Legal, another firm involved in the Court of Appeal case, suggest that the total pot could come to £55 billion.
That would "dwarf" the £38 billion paid out in PPI claims according to Sentinel's director Sam Ward.
He told us: "You're looking at £1,500 to £2,000 worth of commission paid and close to 7% statutory interest every year until the claim is made.
"So you could see a 36% uplift [in compensation] on your original claim.
"It can get up to £5,000 quite easily."
When will the compensation be paid?
Following the court case, the FCA has announced it will extend the deadline for finance providers to deal with complaints before publishing its final report.
The report was originally due in September, but has since been pushed back to May 2025.
However, the regulator is now writing to the Supreme Court to determine whether lenders will be able to appeal the lower court's ruling.
Details will be set out in the next fortnight, with the extension expected to be finalised by mid-December.
It is not clear what this will mean for the release of the report and whether it will be delayed further.
A statement from the FCA read: "Any complaint extension would allow them time to consider how these might be efficiently and effectively handled.
"This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market."
The deadline for firm's to respond to complaints is currently December 4, 2025.
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You can still make a claim until July 29, 2026 or up to 15 months after you receive a final response from your lender, whichever is later.
New claims are on hold until the report is published, but it's worth submitting yours now so that you can get a response as soon as possible thereafter.
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