TIPSLIFEHACKS

Did You Finance a Car and Later Feel Wronged? Get Ready for a Compensation Scheme!

Following a groundbreaking Supreme Court ruling, the UK’s financial watchdog, the Financial Conduct Authority (FCA), is launching a compensation scheme to address widespread mis-selling of car finance. This news brings relief to countless individuals who may have been unfairly charged fees and interest on their car loans. Let's break down what this means for you and what steps you can take.

The Supreme Court Ruling: A Turning Point

The story began with a legal challenge brought by several drivers against lenders. The core question was whether discretionary commission payments (DCPs) – essentially bonuses paid to car dealerships based on how many loans they sold – should have been factored into affordability assessments. The Supreme Court ruled that, in many cases, these DCPs should have been considered, and that this failure to do so could have led to customers being able to afford loans they couldn't.

What Does This Mean for Car Finance Customers?

The FCA estimates that as many as 1.6 million people may have been affected by this mis-selling. The compensation scheme aims to reimburse customers for the mis-sold commission, plus interest. While the exact amount of compensation will vary depending on individual circumstances, it could be substantial for some.

Who is Eligible for Compensation?

Generally, you may be eligible if:

• You took out a car finance agreement between April 2008 and January 2020.
• You were charged discretionary commission payments.
• The FCA determines that you were not assessed for affordability correctly, considering those DCPs.

It’s important to note that if you’ve already received compensation for the same issue, you won’t be eligible for further payments.

How Will the Compensation Scheme Work?

The FCA is working with lenders to establish a streamlined process for claims. Here’s a likely outline:

• Lenders will contact potentially affected customers: Lenders are expected to proactively reach out to customers who may be eligible.
• Online Portal: An online portal is being developed where you can submit a claim and track its progress.
• Claim Deadline: There will be a deadline for submitting claims, so it's crucial to act promptly. The FCA is expected to announce this soon.

What Should You Do Now?

If you think you might have been mis-sold car finance, here are your next steps:

• Gather your documents: Collect any paperwork related to your car finance agreement, including the finance agreement itself, statements, and any correspondence with the lender.
• Wait for contact from your lender: Be on the lookout for communication from your lender.
• Check the FCA website: The FCA website (www.fca.org.uk) will be the primary source of information about the compensation scheme.
• Seek advice: If you’re unsure about your eligibility or the claims process, consider seeking advice from a financial advisor or consumer rights organization.

A Positive Step for Consumer Protection

The launch of this compensation scheme marks a significant victory for consumer protection and demonstrates the FCA's commitment to ensuring fairness in the financial services industry. While the process may take time, it offers a vital opportunity for those who were unfairly treated to receive redress.