Claim Car Finance: A Step-by-Step Guide to Filing a Car Finance Complaint

Recent proposals from the Financial Conduct Activity (FCA) and significant court rulings have enhanced consumer empowerment, enabling them to claim car finance compensation. It is crucial for individuals who suspect they have been mis-sold a car finance product to comprehend the procedure for lodging a complaint. Whether your concerns revolve around commission issues or the pursuit of compensation related to car finance, this guide will outline the necessary steps to protect your rights. 

Who Can File a Complaint Against Motor Lenders?

Car finance complaints can arise from a wide range of consumers. If you’ve engaged in finance agreements like a hire purchase or personal contract purchase (PCP) to buy a vehicle, you could have a legitimate complaint. This is particularly the case if you suspect that commission payments may have impacted the terms of your agreement. 

While the FCA started cracking down on DCAs, the Court of Appeal’s ruling on 25 October 2024 opened up the possibility of PCP finance claims for non-DCA contracts. If you feel that the dealer’s offers was affected by commission structures in conflict with their fiduciary duty, you are entitled to file a complaint. 

How to File a Car Finance Complaint

Step 1: Evaluate Your Contract

The first step is to assess your contract to see which aspects are misrepresented. This helps you prepare for the next phases, as it gives you a robust standing when filing a claim. 

Step 2: Reach out to your car dealer

Proceed by contacting the entity involved in your car financing arrangement, whether it’s your car dealer, lender, or auto broker. Inform them of your dissatisfaction and your decision to file a complaint. To help make the process go smoother, make sure to include as much information as you can, such as your name, policy number, contract date, vehicles registered, and contact info. 

Step 3: Await the Company’s Final Response

Once you have lodged your complaint, the firm is expected to respond within the given timeframe. The wait used to be 8 weeks or 45 days, but with the ongoing probe by the FCA, lenders now have more time to evaluate your complaint. Take note of the watchdog’s extension proposal before escalating the matter to the FOS. As of this writing, the agency proposed an extension from 25 May 2024 to 4 December 2024.

Step 4: Escalate to the Financial Ombudsman Service

Should the firm’s final response arrive after the extended timeline, you may escalate your complaint to the FOS, which will assist you in handling the case. To do this, you must submit your complaint to the office and get a case handler assigned to your file. Keep in mind that you might be required to provide additional documents like your contract and initial disclosure documents. The Ombudsman will evaluate your claim and determine how to address the situation.

If you have previously received a rejection for your discretionary commission arrangement claim, you also have the option to escalate the case to the FOS. You should also follow up with the office to find out what to do next. 

How Much Compensation Can You Expect?

The amounts awarded for car finance mis-selling can vary significantly based on the particulars of each case. On average, those who successfully file claims tend to receive payouts that exceed £1,000. For a common £10,000 agreement with a loan term of four years, the estimated payout is around £1,100. However, keep in mind that some claimants were able to receive £1,500 to £1,600 per agreement with the help of claims management companies.

Which Companies Are Being Assessed?

There are various car finance companies implicated in the issue. In light of this, the examination of previous discretionary commission arrangements (DCAs) is currently underway by the FCA. This investigation aims to uncover car finance companies that participated in such activities prior to the 2021 ban. The focus of the inquiry is to look into the possibility of consumers being overcharged due to brokers’ undisclosed commissions.

Car finance companies being investigated include those that previously utilised DCA frameworks. This helps the FCA to identify whether these firms misrepresented the actual costs related to their financial terms.

In connection with this probe, some companies have taken measures to mitigate the impending impact of the claims. For instance, Close Brothers has halted new car loans and set aside £252 million. Santander also prepared for around £1.1 billion, while Lloyds Banking allocated hundreds of millions. Other noteworthy firms are Volkswagen Financial Services, Barclays, Black Horse, and BMW Financial Services.

What’s Next?

The process of filing a car finance complaint can seem overwhelming, but it is essential to know your rights and how to exercise them. Thanks to the FCA’s increased consumer protections and recent court rulings, this is a particularly advantageous time for consumers to pursue redress. If you believe your car finance deal was mis-sold, take the first step and assess your contract.