The FCA recently launched an investigation into whether car finance customers were overcharged for their loan and the review could see millions of drivers receive compensation.
The Financial Conduct Authority has already received over 10,000 complaints from customers who are concerned they were charged too much for their historical car finance deal. This has sparked Watchdog, a British consumer complaint service, to investigate claims, and should widespread misconduct be found, settlements could be made to reimburse customers.
The complaints made by UK drivers relate to them being unfairly charged inflated prices on both new and used cars. In 2021, the FCA stopped car dealers from overcharging customers. However, before 2021, some lenders allowed dealers to adjust the interest the customer was offered to increase the commission the dealer could earn. This incentivised dealers to increase how much drivers were being charged for their car finance agreements.
An influx of complaints has forced the FCA to pause the process and investigate if misconduct is widespread. However, already the vast majority of these claims have been rejected. Many of the complaints are being pushed by claim management firms on behalf of the customer, who take a cut of compensation if the claim were to succeed.
The FLA (Financial and Leasing Association) added “We will work with the FCA over the coming months to resolve this issue.” However, it also said that “speculative and unfounded complaints issued by claims management companies have congested what should be a smooth, prompt and clear process”.
How does it affect UK Car Finance customers?
There’s nothing you need to do at the moment as the FCA has introduced a pause on taking on new complaints whilst they investigate.
As a car finance broker who is authorised and regulated by the Financial Conduct Authority, we want to assure customers that practices which enable dealers to make hefty commissions have been banned since 2021 and we are not incentivised to charge customers more than they need to pay. Instead, we help our customers find the lowest rate of finance available to them from our panel of trusted UK lenders!