After originally trying to push its own influence over the Court’s verdict, the Treasury said in a statement that it “respect[s] this judgment from the Supreme Court and will now work with regulators and industry to understand the impact for both firms and consumers.”
Am I owed car finance compensation?
Following the Supreme Court’s judgement, the FCA said it would launch a consultation into a potential redress scheme for those having signed up to finance deals involving DCAs, as well as those including “non-disclosure of other facts relating to the commission that [made] the relationship unfair.”
What does this mean? Well, it appears those with DCA finance agreements, as well as those who will be able to claim that their finance deal was misleading in any way, will be entitled to compensation.
In some sense, this is bad news for consumers because it means that far fewer people will be eligible to receive redress. However, it’s a slightly less severe blow to the industry, given that the issue is expected to cost around £18 billion, rather than the £40-50 billion originally expected.
Nevertheless, the Finance and Leasing Association – the trade body that represents lenders – called the idea of an official redress scheme “impractical”, saying that it has “concerns about whether it is possible to have a fair redress scheme that goes back to 2007 when firms have not been required to hold such dated information, and the evidence base will be patchy at best.”
How much will I get in car finance compensation?
Unfortunately, the payout for those affected looks to be a lot less than what was originally expected; while estimates suggested that most claimants would be able to walk away with four-figure sums, the FCA suggested that the majority will likely get less than £950 per finance deal.
This will come as a disappointment to some, however the FCA insists this is in an attempt to balance the impact on both businesses and consumers. But with such a low figure and many paying tens of thousands of pounds out on the average finance deal – several thousands being that of the inflated DCA interest rates – many might not get back all of what they are technically owed.
Do I need to do anything?
For the time being we recommend simply filing a complaint with your lender; there are several free tools available online, such as the one from Martin Lewis’ MoneySavingExpert, which can help you find old finance agreements and draft such a letter.
There is also the option of sitting tight for now; the chances are that the FCA will announce what’s known as an ‘opt-out’ redress scheme, which means lenders will be forced to get in contact with you in order to arrange compensation. However, there is still no harm in filing a complaint because this will cover all bases, on the basis that the FCA might make the redress scheme ‘opt-in’, forcing consumers to do the contacting legwork themselves.
Most important, however, is that Auto Express’ advice is not to sign up for any of the dozens of car-finance claims-management firms you’ve undoubtedly seen being advertised online. Not only is doing so unnecessary, but they can also take up to 30 per cent of your winnings – even if the FCA sets up an ‘opt-out’ scheme in which the claims firms would have to do nothing.
Thinking about buying a new car? Click here for our guide on how to buy a car online…