Mis Sold Car Finance Claim
What is mis-sold vehicle finance?
The final findings in the motor finance report by the Financial Conduct Authority (FCA) in March 2019 established that dealerships and vehicle finance firms and companies have largely misinformed their customers in communicating commission structures which has often resulted in customers unknowingly paying more than they should have to finance their vehicle.
The mis-selling of vehicle finance has been found on all vehicle types including new and used cars, motorcycles and motor homes/caravans, under all vehicle finance options such as Personal Contract Purchase (PCP), Hire Purchase (HP), Personal Contract Hire (PCH).
Individuals who have purchased a vehicle on PCP, HP or PCH finance within the last ten years may be eligible for a claim.
The FCA have discovered widespread evidence of mis-selling on all types of vehicle financing options. The FCA found that over 560,000 consumers were paying more than 50% more on their car finance than they should have been.
It is estimated by the FCA that commission models which allow broker discretion over the interest rate could be costing customers £300m more annually when compared against a baseline of Flat Fee models.
The FCA were not satisfied that all lenders were complying with FCA rules on assessing creditworthiness, including affordability. Some lenders seemed focused unduly on credit risk (to the lender) rather than affordability (for the borrower), and there were gaps in the information provided by lenders at the request of the FCA.
Have you purchased a vehicle on finance in the last 10 years?
If you have then you may be eligible to claim compensation where the dealership did not disclose that they were receiving a commission for arranging your finance agreement with the finance provider/lender. If you were not informed about the commission the dealership/salesperson would receive, you could be owed compensation.
Both the dealership and the lender were obligated to be transparent and inform you of the commissions paid to the dealership/salesperson. If you were mis-sold the vehicle finance it would actually have been you who was paying the commission by the way it was applied in the finance deal and due the non-disclosure of the commission.
We will review your agreement and inform you as to whether you have been mis-sold finance and if the commission in relation to your agreement was wrongly manipulated. We will inform you as to amount you could be owed in compensation if we find evidence of this manipulation in your agreement.
If you cannot locate your agreement or cannot recall who the lender or leadership was this is not would prevent you from claiming potential compensation. We can locate the agreement by having just the name of the lender or dealership to who the finance payments were made to. The name of the lender or dealership can be found on your bank statements that you will be able to access online.
Companies must also retain customer transactions and contractual agreements for up to six years as required by law. Also, as per the Money Laundering Regulations (MLR) 2017, records of a particular transaction, either as an occasional transaction or within a business relationship, must be kept for five years after the date the transaction is completed. All other documents supporting records must be kept for five years after the completion of the business relationship. The MLR 2017 is applicable to all businesses.
The burden of proof
The burden of proof lies with the lender to show that in all aspects of the process of the sale of the vehicle and finance they have acted within the law. You could be entitled to claim compensation for mis-sold vehicle finance if you answer no to any of the following questions.
- Did the salesperson explain the finance deal they sold to you in sufficient detail?
- Did the salesperson present to you every finance option available, including explaining all of the differences in each type of finance deal
- Was the salesman completely transparent with the interest rates charged for all loan options and how each loan you could purchase may differ?
- Did the salesperson offer the best interest rate available to you?
- Did the salesperson convince you into purchasing a finance deal that was unaffordable?
- Did the salesperson clearly explain to you who was financially responsible for any repairs to the vehicle?
It is the dealership’s responsibility that to show they did all of the above. If the dealership cannot prove that they did all of the above, you will be eligible to claim compensation for the mis-sold finance agreement.
Should you be unsure about any of the questions above, we will review your agreements and inform you as to whether you can claim.
How much is my claim worth?
From the FCA report it is estimated that the average amount of compensation for a mis-sold finance compensation claim could be in the region of £1,100. In some cases, the amount owed for such a compensation claim could be higher.
The exact amount recoverable will be dependent on the following factors:
- The size of the loan acquired. The higher the amount of the loan the more you will be able to claim.
- The interest rate you were quoted, and how much difference there is between the rate quoted and the rate you should have been quoted.
Hidden Commission and Secret Commission
In the process of completing the investigation on your claim we will be able to decipher as to whether your finance deal contained hidden commission and/or secret commission.
The FCA 2019 report has shown that numerous vehicle finance companies have included hidden commission and secret commission in finance deals offered to consumers.
You may be able to claim compensation for a mis-sold vehicle finance deal if you believe that commission was hidden from you in the finance deal.
In vehicle finance – hidden commission is where the dealership/salesperson sells you a finance agreement from a lender.
If the dealership/salesperson received commission for delivering the vehicle finance deal to the lender, and the lender did not inform you of the commission then that is a hidden commission. You were not expressly informed about the commission the dealership/salesperson received as a result of you opting into the finance agreement. The lender must inform its consumers of every fee within the transaction.
The dealership should have informed you at the point of the vehicle sale how much the commission was they would receive as a result of you purchasing the finance agreement. If the dealership failed to do this, it is fraud. The liability for the mis-sold vehicle finance may then lie with the finance provider and the finance broker.
In the FCA’s official report they have shown that some vehicle finance providers/lenders have concealed the existence of any commission offered by their brokers. In the FCA’s investigation in relation to the mis-selling of PCP finance agreements, they found that:
Only 11 out of the 122 dealerships visited by mystery shoppers confirmed that commission will be added to this type of deal. The remaining 111 dealerships did not disclose whether the commission would be added to the mystery shoppers’ finance deal.
The FCA has banned hidden commission in vehicle finance deals
The FCA in June 2020 imposed an outright ban on commission linked to vehicle finance deals. The impact of this is that finance brokers will not be allowed to charge a commission based on the interest rate offered from 28th January 2021. It is estimated by the FCA that the ban they have imposed will save consumers in the region of £165 million a year.