Latest World Breaking News Online News Portal
Money expert Martin Lewis has issued a warning to drivers over payouts on car finance misselling which could total £15Bn.
The Money Saving Expert founder took to his Twitter account to launch an instant reaction to the Supreme Court’s decision on the car finance misselling scandal which could see millions of drivers paid billions of pounds in compensation for allegedly unfairly sold car finance loans.
The UK’s highest court ruled on Friday that car dealers did not have a relationship with their customers that would require them to act “altruistically” in the customers’ interest.
A ruling in October last year found that three motorists, who all bought their cars before 2021, should receive compensation after they were not told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from the lenders for introducing business to them.
On Friday, judges ruled that car dealers did not have a relationship with their customers that would require them to act only in the customers’ interest, and that the Court of Appeal was wrong. But they said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA). Only one of the three motorists’ cases was upheld by the court as ‘unfair’ in terms of the relationship with the finance company.
Martin Lewis warned drivers that following the court’s verdict on Friday, they must not sign up to a claims firm now because they could lose up to a quarter of their payout if they do.
Martin said that there are two types of car finance misselling. First, is discretionary commission arrangements. This is a PCP deal or higher purchase deal from a broker or dealer taken out before January 2021.
Your interest rate could have been increased from the minimum so your broker or dealer got more commission, Martin explained.
Martin said: “That was banned in 2021. What could have happened last year, the regulator announced it would be investigating that and it is very likely people were missold on that basis, is what we’re thinking right now.
“What we were waiting for in the Supreme Court decision was if it said anything that stopped Discretionary Commission Arrangements being done, or a redress scheme being done by the regulator. There wasn’t anything as far as I can see right now. So I suspect within the next 6 weeks, it will launch a consultation for a redress scheme.”
He then added a ‘very big warning’: “There’s a possibility that redress scheme may be automatic, in other words you don’t even need to put a claim in and you’ll be paid out.
“Which is why I have a very big warning: DO NOT sign up to a claims firm now if you’re thinking of it, because it is absolutely plausible that you will get the redress without doing anything but the redress firm will want 25 or 30% of the money, even though it hasn’t done anything.
“So sit on your hands right now, we’re waiting to see what happens with the regulator.”
Martin then explained that the Supreme Court case itself is slightly different. There were three different cases in the mix.
He added: “One is about the fact that if you didn’t know what the commission was and the car broker wasn’t acting as a disinterested party, it was effectively bribery.
“The second was very similar…now what the court has said is no, they don’t have to be independent, they clearly have a relationship with the car finance firm and therefore it rejected the Court of Appeal’s decision on those two claims.
“Now crucially, that means what was talked about in the widest area, that if you had a car finance arrangement and it hadn’t told you what the commission was at all, even if it wasn’t excessive, that would mean the car finance was invalid and you’re due compensation. That’s gone, that’s not happening at all.”
He then added that the third case which it HAS upheld, is one of unfairness, with a number of terms – when commission is excessive, when the broker is not independent but claimed to be, that was deemed to be unfair and all the interest is paid back.
Martin said he calls these ‘excessive commission arrangements’, and he hopes that a redress scheme will be announced for excessive commissions when it runs the consultation on the redress for the aforementioned discretionary commission arrangements.
He told viewers he thinks that means total payouts across the industry could total £5Bn-15Bn.
Martin added: “My biggest message, don’t do anything, don’t sign up to a claim firm, sit on your hands, you don’t need to do anything.”
The Financial Conduct Authority (FCA) said it will confirm by Monday whether it will consult on a redress scheme.
The FCA, which intervened in the case, previously said it would set out within six weeks whether it would consult on a redress scheme.
But a spokesperson said after the ruling that it would confirm whether it will consult on any such scheme by 8am on Monday “to provide clarity as quickly as possible”.
Lord Reed said the Supreme Court had decided to deliver its ruling on a Friday afternoon, outside of trading hours and after the markets had closed for the weekend, to avoid the risk of “market disorder”.
