£280 warning to anyone who bought car between 2007 and 2024

BBC finance expert Iona Bain said £1,800 claims are ‘not true’ and warned people could lose £280 to claims management companies

A BBC expert has issued a warning to anyone who purchased a car between 6th April 2007 and 1st November 2024. Finance specialist Iona Bain informed viewers of BBC Morning Live that they could lose an average of £280 if they make the wrong decision.

Ms Bain explained to hosts Helen Skelton and Rav Wilding that the final details of the car finance compensation scheme will be released in March, but individuals could miss out if they appoint a claims company. The Financial Conduct Authority (FCA) aims to compensate motorists who were unfairly sold a car loan between 2007 and 2024 due to inadequate information about the commission paid to brokers, including car dealerships.

Under the current proposals, approximately 14 million car finance agreements could be eligible for compensation, with individuals expected to receive an average of £700 per agreement. Ms Bain stated: “So, if you took out car finance with a vehicle that was bought between 6th April 2007 and 1st November 2024, and if the car finance deal you got was Personal Contract Purchase (PCP), then you could be eligible for a share of this compensation bill, which is £8 billion.”

She added: “Essentially, we’re talking about the commission that was paid behind the scenes by car finance lenders to brokers whenever they sold one of these deals. Customers weren’t always aware of the level and scale of this commission, and that meant, in many cases, customers ended up with car finance deals that were more expensive and less competitive than they should have been.

“And that’s certainly what the Supreme Court ultimately ruled, and it decided that compensation was due to all those customers that were potentially in that situation. So look, it’s taken a while to get to this point, but now the Financial Conduct Authority (FCA)-which is Britain’s regulator in this area-it’s said it’s going to be publishing the system for how people can apply for compensation in the next month or so.”

She assured that the system being developed will be simple and, crucially, free to use. She stated: “You can make a claim yourself; you don’t have to rely on a third party like a claims company. It should be completely straightforward for you to do yourself.”

She issued a warning about claims management companies inundating people – and clarified they are making unjust claims and then will take substantial fees. She explained: “If you see these adverts online, they are very enticing. They make claims like, “We’ll handle your claim for you,” “No win, no fee,” or “You could get thousands.

But this is the reality: if you use one of these claims companies-whilst it’s perfectly legal to do so-they can take 20% to 40% of your compensation. “”.

A person receiving a payout of £700 would end up paying £280 to the company. Ms Bain added: “It is a lot. It means you won’t keep all the money that you’re ultimately owed. The fees can be hidden in the small print, and you may not be aware of them until you’ve signed on the dotted line.

“So, one example is: let’s say you’ve signed up for a claims company, but then you change your mind-and that’s your right to do so. Some of these claims companies are charging termination fees for the work that’s been done, and those termination fees can be spurious and disproportionate for the work that’s actually been done.”

She highlighted an advert claiming the average car finance compensation payout would exceed £1,800. Ms Bain stated: “I’m just going to say it: that’s not true. It’s not true, and the reason for that is that the FCA has not confirmed what compensation people are going to be getting. So, it has said that the average amount that will be paid out will be £700. Some people will get more, some people will get less, but it’s impossible to say at this stage what individuals will be getting until we know more about that FCA process.

“And also, I’m hearing these reports of people seeing these adverts, then giving their contact details to these claims companies, and then being bombarded by texts and calls trying to persuade them to sign up. I personally think that’s unacceptable.”

Other things to watch out for are:

• Upfront fees
• Unexplained charges
• A company promising guaranteed payouts or huge sums of money.

Ms Bain explained: “These are all big red flags. Just a reminder: you don’t need to use one of these companies. You can do this yourself and you get to keep all the compensation.”

Morning Live has provided a template for this on their website here.