Car finance has become a key battleground for regulators as concerns grow over mis-selling by dealerships. The Financial Conduct Authority (FCA) has issued warnings to car dealers regarding their sales practices. Investigations suggest that customers may have been misled into agreements that cost them far more than necessary.
The Scale of the Issue
The FCA launched a review into discretionary commission arrangements used by many dealerships. This practice allowed brokers to set interest rates on car finance deals, incentivising them to charge higher rates. The regulator estimates that consumers could have been overcharged by a collective £300 million per year due to these arrangements.
A survey by Which? found that 92% of car buyers using finance did not know brokers could set their interest rates. This lack of transparency meant thousands may have paid more than needed for their vehicle loans. The FCA banned discretionary commissions in January 2021, but many customers may still have grounds for compensation.
Signs of Mis-Selling
Customers may have been mis-sold car finance if they were not properly informed about key terms. Some dealers failed to explain how interest rates were set or omitted details about commission structures. In other cases, buyers were encouraged to take out finance when more affordable alternatives were available.
If you were sold a finance deal and were not made aware of broker commissions, you might have a claim. The FCA advises customers to check their finance agreements carefully. It is also worth reviewing emails and paperwork from the dealership to see what information was provided at the time of purchase.
What This Means for Car Dealers
Regulators have made it clear that they will take enforcement action if widespread mis-selling is found. Dealers may face fines, compensation orders, and reputational damage. The FCA has also reminded lenders that they have a duty to ensure fair treatment of customers.
Industry experts believe that increased scrutiny will change how car finance is offered. Lenders may require dealers to provide clearer information upfront, reducing the risk of mis-selling. Some have already introduced new commission models to remove conflicts of interest and rebuild trust.
How to Make a Claim
If you believe you have mis-sold car finance, you may be entitled to compensation. The first step is to check your finance agreement and review what information was provided. If key details were not disclosed, you can file a complaint with the dealership or finance provider.
Customers can also seek help from the Financial Ombudsman Service (FOS) if their complaint is not resolved. Claims companies have also entered the market, though they take a percentage of successful claims. Some people affected by these practices have already received compensation for their losses.
Final Thoughts
Regulators have made it clear that mis-selling in car finance will not be tolerated. Buyers should check their agreements, question unclear terms, and take action if they were misled. The impact on the industry could be significant, with stricter controls ensuring fairer treatment for consumers moving forward.
If you have ever taken out a car finance deal and suspect you were overcharged, now is the time to act. With increased awareness and regulatory oversight, more people may be able to reclaim money they never should have paid in the first place.
Important Note: If you think you may have been affected, you can check whether you qualify for a refund. This applies to various types of finance agreements, including PCP claims, which have been at the centre of mis-selling concerns in recent years.