Mis-sold Vehicle Finance. Millions owed Refunds.
If you bought a car or van between 2007 and 28 January 2021 using finance you are very likely to have been mis-sold and are possibly owed thousands of pounds in compensation.
The vast majority of people would have no idea that they’ve been mis-sold. This is because the issue is that brokers (usually vehicle dealerships) have taken secret commissions for signing people up to agreements with higher interest rates than they should have paid. Put simply, people have paid more than they should have for their vehicle finance and are likely to be able to claim this loss back.
The recent Financial Conduct Authority (FCA) investigation discovered widespread evidence of this car finance mis-selling where brokers were paid secret commissions for charging high interest rates on the finance. The FCA found that the use of this type of commission creates an incentive for brokers to act against customers’ interests by charging more expensive credit.
Refundee has helped victims of fraud reclaim over £30 million, and is helping thousands of people to get their money back through motor finance mis-selling claims. You can do this yourself for free or use Refundee. We are no-win no-fee and charge 25% + VAT on anything you get back subject to a cap of £5,000 for larger claims.
I have taken car finance,
do I have a claim?
The Financial Conduct Authority (FCA) has said that commission was paid on 95% of car finance agreements. If you weren’t told the exact amount of commission paid then you have a claim and if you took car finance then you are extremely likely to have been charged more then you should have been. In the vast majority of cases, people were not told about this commission.
Why was the commission important? The FCA investigation highlighted that lenders incentivised car dealers to charge high rates of interest but paying them more commission they higher interest rate they charged. Since this commission was paid in 95% of car finance agreements, most of the UK public who has ever taken a vehicle on finance is owed a refund.
This type of commission arrangement between the person selling you the car and the person providing the finance is known as a discretionary commission arrangement, and was banned by the FCA on 28th January 2021 due to the impact on customers and said it thought this would save the public £165 million in unnecessary interest charges per year.
If the person who sold you the car failed to disclose their commission, then you have a claim. You are also eligible if they failed to explain the details of your contract adequately, the interest rates, or if they did not properly complete affordability checks. You are also eligible if they did not present all of the lending options.
This applies to various types of motor finance, there was Personal Contract Purchase PCP mis-selling and so PCP refunds due, as well Hire Purchase HP and Conditional Sale lending that was improperly lent and open to claim for refund.
How much will I be refunded for mis-sold car finance?
The average refund for mis-sold vehicle finance is estimated to be £1,100, but many will be owed much more than this. Refundee will also claim 8% annual interest from the date you took the borrowing so the true refund figure will likely be much higher.
The FCA said that an average customer on a £10,000 PCP agreement over 4 years was overcharged more than £1,100. So you could be due thousands of pounds, especially if you took a larger loan.
How much money you will get exactly as a refund depends on a number of factors. In-particular:
How much you borrowed: the more you borrowed the larger the refund you are due
How long you borrowed the money for: the longer the agreement the more you will be refunded as the more unnecessary interest you would have paid
Interest rate you were charged: the bigger the difference between the interest they charged you vs what they should have charged you, the higher the refund owed to you
You can do this yourself for free
You don’t have to use Refundee or any other claims company to get your money back. If you want to do it yourself, you can!
When you submit a case, the burden of proof is on the lender or the people who sold you the car to show they acted legally in all aspects of the sale and finance. Some key things to keep in mind that show mis-selling:
They never told you they would be paid commission for putting in place the vehicle finance. This is the biggest area where millions of car finance agreements were likely mis-sold and refunds are owed
They did not offer you the best interest rate available. Refundee think this was a major failure in vehicle finance mis-selling as the person selling you the car would be paid more commission the higher the interest rate they charged you
They did not explain the interest rates for all of the finance options
They never presented all of the lending options available and the differences between each type
They didn’t do proper affordability checks
They made you feel pressured into acting quickly or you did not feel like you were given time to think about the contract
They never explained the details of the finance including the T&C’s
How to Claim for mis-sold car finance agreements
Refundee can do everything for you on a 100% no win no fee basis. All we need are some basic details from you.
If you want to claim yourself, you can do this by:
Putting your arguments forward to your lender, telling them why you think the redress is owed
You should try to provide your paperwork to support your arguments. If you don’t have this to hand, you can do a Data Access Subject Request to the lender. It will likely take them a month to provide the documentation
Challenge the lender at the Financial Ombudsman Service who are the independent body set up to examine these types of complaints
What types of vehicle finance are owed refunds?
If you took any of the below types of car finance agreement you can claim:
Personal Contract Purchase (PCP): If you took a Personal Contract Purchase PCP motor finance then you can claim for mis-sold PCP finance. 80% of all new cars are financed this way.
Hire Purchase (HP): If you took a Hire Purchase Agreement then you can claim for mis-sold Hire Purchase motor finance.
Conditional Sale (CS): If you took Conditional Sale motor finance then you can claim for mis-sold Conditional Sale motor finance.
To see what type you took, check your documentation. If you want help with this or don’t have your paperwork, you can contact Refundee who can do this for you on a no win no fee basis.
What has the FCA recently announced?
On 11th January 2024 the Financial Conduct Authority initiated an investigation into vehicle lending firms. This was due to the high volume of complaints about discretionary commission arrangements and the high rejection rate from the lenders.
In its policy statement following its review of complaint handling at the vehicle lending firms, the FCA said between January 2019 and the end of June 2023, firms closed around 30,000 motor finance commission complaints, of which 99% were rejected. So despite the existence of these commission arrangements that caused widespread overcharging of the public, firms rejected almost every case.
These outcomes were particularly worrying in light of the approach of the Financial Ombudsman Service, which published two decisions upholding complaints about the commission against two lenders.
The FCA announced a pause of complaint responses while it investigated whether to introduce a redress framework. The 8-week deadline for motor finance firms to provide a final response to relevant customer complaints was paused for all complaints about motor finance agreements where there was a discretionary commission arrangement between the lender and the broker and will last for 37 weeks (approximately 9 months).
Motor car lenders will not therefore be able to issue final decisions on complaints about discretionary commission arrangements until 25 September 2024. After that date, firms will have 5 weeks to issue their responses to the complaints.
What does this mean in practice? It means that the regulatory has identified a potentially serious problem in that most people who took vehicle finance were probably charged more than they should have been and were mis-sold, but firms are rejecting almost all of those cases.
What has the Financial Ombudsman Service said about motor finance commissions?
While firms are rejecting 99% of complaints, the Financial Ombudsman released two final decisions on 10th January 2024 that upheld the complaints about the commission against the lenders.
The FOS founds that the discretionary commission model created an inherent conflict between the interests of the broker and the customer, as they were incentivised to charge a higher interest rate than needed so that the broker could collect more commission.
It highlighted that the commission arrangements were breached FCA regulations, the FCA Principles and likely was unfair under the Consumer Credit Act 1974 for a number of reasons.
As a result, it ordered the motor finance lender to pay a refund for the commission arrangements which was to either:
Refund the difference between the interest rate paid and the interest rate they could have paid or
Refund the total value of the loan or
Refund the unfair commission
This means that millions of car finance agreements have likely been mis-sold and customers are therefore owed significant refunds.