Following the release of the Financial Conduct Authority (FCA) report on car finance claims, and their plans to compensate those effected, UKMotorTalk’s Graham Benge takes a look at the situation and what you should do if you bought a car on finance between 6th April 2007 and 1st November 2024.
So there you are, walking the cow to market to see if you can get the best deal you can. And a rather disreputable looking bloke comes up and offers you some magic beans in exchange for the cow. And you bite his hand off. You grab the magic beans. You think this is a life changing event and he spins you a tale about a giant and gold in a giant tree and so on and so on.
We fall for it.
Okay, well, we know it’s a fantasy. It’s a children’s tale.
But, how many people have fallen for the modern fantasy that’s just going on at the moment? Let me run that by you.
We’ve seen it on the TV, we’ve seen it in magazines and newspapers… “You’ve been mis-sold Car finance, you’ve been ripped off by the dealer, by the finance company, by anybody and everybody. And we can recover the money that you’ve been overcharged, life changing amounts of money”, suggestions of thousands of pounds can be recovered.
Well, that’s a fantasy as well. It really isn’t like that. So let’s try and take a step back, guide you through the process sensibly.
We’re just a couple of days after the report by the Financial Conduct Authority, the FCA, into their investigation, which has been going on for several years now.
Now, what does it cover? It covers anybody that’s been sold car finance from 2007 to 2014 and then separately from 2014 to today.
So what’s mis-selling?
Mis-selling in their view is if you have been sold finance on your car, hire purchase, PCP, whatever the sort of credit agreement is, if you’ve been sold that at a rate which is above a reasonable market rate.
So you know the dealer who offers you the finance, is acting on behalf of the finance company, he can offer you whatever, rate he feels like, and he gets a commission back if he offers you a rate which is higher than the market norm. And the market norm is around the bank rate because, yes, you could have gone to the bank and borrowed the same amount of money probably.
Or if the main dealer is acting for Ford, Volkswagen, whoever, they all have their finance arms. If he has made an addition to the rate that they’ve offered or they’ve offered some sort of a deal to him, then you’ve got certainly grounds for complaint and, we’ll come on to this in a moment, complain you must.
But the FCA has spent a long time investigating this. The suggestion is that there have been within that time scale something like 12 million finance deals, which may or may not have been less than fair, let’s put it that way.
But in fact, if you drill down into their report, they’ve set some sort of parameters of what is fair and what might just be slightly tweaked and what might be hugely inappropriate and you might not know it because you’ve not been informed of any offer from any competition. You’ve been presented with a deal when you bought that car, but they’ve actually gone through these and they reckon that within their parameters of what is and isn’t fair, that there is a need for a mass redress scheme, but that mass redress scheme probably only affects something like a million people.
And if you honestly thought you were going to get thousands and thousands and thousands out of this, you’re not. The industry is committed at the moment to paying out something like £9.1 billion, which the FCA will seek to disperse, but the level of payout is likely to be somewhere between £750 and £850, certainly sub-thousand pounds and the figures of thousands which are mentioned in some of those fantasy adverts, that’s all gone by the board.
Now as we speak, the industry is considering its position. It may elect to go to appeal whether to take the matter to court. There is an appeal process within the FCA’s decisions. They may decide to do so. We don’t know that at this stage, but what can you do at this stage and what should you do? What you must do is complain NOW.
You may or may not be in that group which have been unfairly treated as defined by the FCA, but if you don’t ask, you don’t get, so complain now.
There are example letters online you can download for free. There’s lots of advice online. Aside from this, you can look at the Martin Lewis Money website. He’s got some very good advice.
You could read the FCA’s website because there’s very good advice on there on procedure.
You could look at Equifax. They’ve got a free guide to where your policies might be because we all get a bit careless with paperwork, particularly when it relates to 2007. I can barely remember 2007, and certainly not where the paperwork might be.
So you need to go search and find what paperwork you’ve got and then you need to complain.
And I would suggest you write to the dealer and write to the finance company. As I say, there are draft letters online. You can fill in all the essential details.
The FCA is suggesting. If you complain now, direct to those people that arranged that finance, then the chances are there will be a payout this year.
If you don’t complain, and the other part of the mechanism is that those dealers and finance companies have to contact you and they are obliged to do so, then the payout is likely to be somewhat delayed. And if the finance company or dealer or both acting together don’t know where you are, for example, you’ve moved once or twice or more. You’ve changed name, you might have married and changed surname. If they don’t know who and where you are, the chances of them finding you are quite slim.
So do complain now. Write your letters, pursue them if you need to. Give them a month or so to respond and then do a follow up letter.
Don’t absolutely don’t sign up to one of these companies.
If they do assist you, they can take anything up to 45% of whatever you get. So if you’re getting 800 quid and 350 quid of that is going to them, it ain’t much of a windfall is it?
The other problem is that if you do sign up to them and then withdraw, they can charge you a penalty fee for their services, whether they have or haven’t carried any out.
So don’t sign up to these companies. Do it yourself.
I know it’s a chore. I know it’s a bit of a pain, but you might well decide it’s worthwhile.
You might not even actually fit the criteria. But nevertheless, it’s worth making your pitch, isn’t it? Or are you just happy to hope that those magic beans will actually grow into something?
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Thanks to: VariousPhotography, Rano Siedemcztery, Andreas, Nans Ceos, no pe, Olena, RuneSnow, Tumisu, Andrew Khoroshavin, Arash Tarasoli, Engin Akyurt, PIRO and Tung Lam for any and all imagery shared on Pixabay… https://pixabay.com
