Martin Lewis issues update for millions of drivers now 'more likely' to get compensation

Martin Lewis says a new landmark court ruling means millions of drivers are now "more likely" to be awarded compensation over car finance mis-selling.

The MoneySavingExpert.com founder explained how a new Court of Appeal finding - which has sent "shockwaves" through the car industry - has the potential to be "precedent-setting" in terms of payouts. The court ruled that customers must be fully informed about commissions when taking out car loans before an agreement can be entered into.

The Court of Appeal said in a summary of its ruling that brokers cannot lawfully receive a commission from lenders "without obtaining the customer's fully informed consent to the payment".

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The outcome of a major investigation from the Financial Conduct Authority (FCA) into car finance mis-selling is due in May 2025. Martin explained how the Court of Appeal's findings "increases the likelihood of car finance compensation" from the FCA probe, the Mirror reports.

Writing in the latest MoneySavingExpert.com newsletter, Martin said: "A new landmark court ruling has sent shockwaves through the car finance world, and certainly makes payouts more likely."

The FCA is investigating car finance deals that contained so-called "discretionary commission arrangements" (DCA), which allowed car dealers to adjust the interest offered to customers, to increase their commission. DCAs were banned by the regulator in January 2021 - but now it is investigating whether compensation could be due.

You could be due compensation if your car finance had a DCA and you bought a car, van or motorbike for personal use before January 28, 2021. The types of finance covered in the FCA probe are personal contract purchases (PCP) and hire purchase - it does not include personal contract hire, often referred to as leasing.

If the FCA does decide that compensation is due, it is not yet clear how much money drivers could potentially get. Its figures suggest drivers paid £1,100 more interest on a typical £10,000 four-year car finance deal when there was a discretionary commission arrangement.

Martin Lewis has previously recommended putting in a complaint sooner rather than later, in case a timeframe is later imposed that could cut off any future complaints. You should make a complaint direct to the lender that provided your car finance.

If you use a claims management firm, they will take a cut of any compensation potentially owed - so the advice is to avoid doing this.

You can put in a complaint yourself for free and MoneySavingExpert.com has a free tool that will help you draft a template letter to send. You can complain even if the car has been paid off, and you can also complain on behalf of someone else if they have passed away.