PCP Car Finance
Misselling Claims
Millions of people in the UK may have been missoldcar finance. It was found in a FCA report that car finance consumers may have been overcharged and deceivedwhen arranging their car finance deals
An inquiry by the in 2019 FCA’s revealed serious evidence of widespread unclear and excessive vehicle finance rates affecting millions of UK drivers.
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, has said “We found that some motor dealers are overcharging unsuspecting customers over a thousand pounds in interest charges in order to obtain bigger commission pay-outs for themselves. We estimate this could be costing consumers £300 million annually. This is unacceptable and we will act to address harm caused by this business model.
More recently, in January 2024 the FCA announced they would be investigating whether secret hidden commisions were being pocketed by brokers having been incentivised to sell car finance agreements at a higher rate of interest.
PCP Claim Milestones
2010-2021
The mis-sold car finance scandal has cost UK consumers an estimated £300,000,000 per year according to the FCA.
2021
Now FCA bans discretionary commission arrangement
January 2024
FCA announces compensation scheme potentially starting in September
July 2024
FCA announces complaint decisions are delayed but redress payments now "more likely" The outcome of a major investigation into hidden, unfair car finance commission will be pushed back from September 2024 to May 2025
Secret Hidden Commisions
It has been unveiled that lenders tend to conceal the existence of commission offered to their brokers. A mystery shopping exercise carried out back in 2018 reviewed the processes followed by 122 retailers in their provision of Motor Finance. Of those 122 retailers, only 11 chose to disclose to the customer that commission may be received by the broker for arranging the finance. This violates CONC requirements as it creates an unfair relationship between customer and lender.
Difference In Commisions
It has been found that lenders often incentivise a broker to charge a higher interest by compensating them with a commission proportional to the interest the sell. The estimated cost of this behaviour for the customers is £300m annually. An FCA consultation entitled : ‘Motor Finance discretionary commission models and consumer credit commission disclosure,’ found that Difference in Charge models are the most damaging to the customer which unnervingly consist of 95% of the 1000 agreements the FCA looked into.
Inadequately Explained Contracts
The mystery shopper exercise mentioned earlier which was carried out by the FCA also wanted to investigate whether or not lenders fully disclosed all the necessary information regarding the Motor Finance agreements to be made. The shoppers found that the concept of ownership of a car under PCP was frequently brushed over or poorly explained. 69% of the mystery shoppers were not made aware by the broker that they would not fully own the vehicle until they had payed the final ‘balloon payment.’
Frequently asked questions
Who has a PCP finance claim?
In keeping with the deadline that prohibited hidden commissions, complaints need to be made only for car finance agreements sold before the 28th of January 2021.
The FCA estimates that 95% of car finance deals used a commission model, and 40% with the crucial ‘discretionary commission arrangements’. If you had such an agreements it wasn’t made clear you stand a chance of being entitled to money back when the FCA finishes its investigation.
How much is a PCP claim worth?
Not even the FCA currently knows the amount of financial compensation that may be available to car finance customers in the future. In fact, The FCA has simply stated that it will “identify how best to make sure people who are owed compensation receive an appropriate settlement in an orderly, consistent and efficient way”.
How long does a PCP claim take?
In short, nobody knows, yet. Undisclosed commission claims involving Discretionary Commission Arrangements are currently subject to a pause instructed by the FCA. The FCA has introduced this pause while investigating the scale of this misselling and deciding upon the appropriate process for future customer compensation.
