Some car finance customers may have been charged too much on their loans. Find out what to do if you think this affects you.
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Before January 2021, some lenders allowed brokers (the person that arranges the loan, for example, your car dealer) to adjust the interest rates they offered customers for car finance.
Typically, the higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement.
Discretionary commission arrangements created an incentive for brokers to increase how much people were charged for their car loan.
We banned this practice in 2021. But there have since been a high number of complaints from customers about how much they were charged before the ban. Providers (lenders and brokers) are rejecting most of these complaints, because they believe they haven’t acted unfairly and haven’t caused customers to lose out.
We’re assessing the extent of the problem to make sure that, if you are owed compensation, you get it in the best way possible.
If you think this may affect you, find out what your next steps should be.
Who this applies to
This applies to you if:
- you used car finance to buy a motor vehicle, for example a car, van, campervan or motorbike, before 28 January 2021 (this includes hire purchase agreements, such as Personal Contract Purchases)
- your lender and broker had a discretionary commission arrangement
This doesn’t apply if:
- you used car finance to buy a car on or after 28 January 2021
- you used a hire agreement, such as a Personal Contract Hire
If this doesn’t apply to you, but you have a complaint about another issue, find out how to complain.
What we’re doing
Pausing the complaints process
We’re examining the issue to make sure that, if you're owed compensation, you get it in the best way possible. In the meantime, we're pausing the 8-week deadline for providers to respond to complaints about car finance involving this type of commission. You can still complain to your provider, but they will not have to respond to your complaint until after 25 September 2024, at the earliest.
It’s important that any complaints are dealt with by providers in a consistent, efficient and orderly way. Given the high number of possible complaints, there’s a risk this might not happen.
Managing this risk is important because this borrowing isn’t covered by the Financial Services Compensation Scheme. This means if complaints aren't dealt with in an orderly way and your provider goes out of business, you may not get the money you’re owed.
Giving you longer to refer your complaint
If you're unhappy with a response you've had from your provider to this type of complaint, we’re giving you longer to take your complaint to the Financial Ombudsman Service.
Usually, you have to take your complaint to the Financial Ombudsman within 6 months of getting a final response from your provider, but we’re extending this by up to 15 months if you were sent a final response between 12 July 2023 and 20 November 2024.
What this means for you
Find out what your next steps should be if you think you could be owed compensation.
If you’d like to receive an update on our work involving car finance complaints and what it means for you, sign up for email updates.
Making a complaint
It’s free and simple to complain to your provider and the Financial Ombudsman if you’re unhappy with a financial product or service. The Financial Ombudsman has information about making a complaint and car finance complaints. And if you’re concerned about the process, you can get free guidance from MoneyHelper.
A claims management company (CMC) can make a complaint for you, but you’ll have to pay a fee.
If you're thinking about using a CMC, or another type of claims management service, find out what to expect.