Millions could claim £1,100 payout over car finance deals, says Martin Lewis

Martin Lewis has revealed that motorists who purchased a vehicle on finance could be in line for an average payout of £1,100 if an ongoing investigation rules in their favour. The Financial Conduct Authority (FCA) is currently scrutinising the practice where lenders allowed car dealers or those arranging the loan to adjust the interest rates offered to customers for car finance.

This was referred to as a discretionary commission arrangement (DCA) and it may have been applied to a person's loan without their awareness. The FCA banned this in 2021 but there have since been numerous complaints from customers about the charges they incurred prior to the prohibition, reports the Express.

Most of these have been dismissed by the brokers, primarily car dealers, but the FCA investigation, set to report back in May 2025, will determine if this is fair. Mr Lewis explained: "It was about discretionary commission arrangements. That's what lenders said to car dealers and brokers. You can makeup the interest rate, and if you push it higher, we will give you more commission."

Financial expert Martin Lewis has revealed that thousands of people may be owed money due to a previously hidden commission arrangement on car finance deals. Lewis explained that between April 2007 and January 28, 2021, some car finance agreements included a discretionary commission arrangement, which was not disclosed to consumers.

He stated: "And this was done without informing consumers. So it was concealed. They were unaware of it. And up to 40% of car finance deals over the period we're discussing had this discretionary commission arrangement. So are you one who may be owed thousands back? " Lewis advised individuals who purchased vehicles using personal contract plans or hire purchase agreements, but not leases, during this period to contact their lenders to inquire about potential claims. He emphasized the importance of acting quickly, saying: "So you have to put in a request and say 'did I have a DCA? And if I did, I want to put in a formal complaint'. Now, while nothing will happen until May, when the FCA reports, you should log a complaint as soon as possible in case there's a time bar later."

Mr Lewis added: "So the earlier you get your complaint in the better in case it stops you being time barred because we've got so much uncertainty."

Mr Lewis notes that instead of using 'no win no fee' solicitors, there are free tools available online that can help, such as the one on the Money Saving Expert website which has been successfully used by over 2.4 million people. He highlights the Court of Appeal's ruling that car firms cannot earn commissions without obtaining the customer's fully informed consent, explaining: "To get fully informed consent, the customer must know all the facts, including the amount of the commission, which was never told. That is a radical clear viewpoint. It increases the likelihood of car finance mis-selling compensation via the FCA next May because the FC had delayed due to these court cases to see what was said."

An expert has praised the court's decision, saying: "And so now they've ruled in a pro consumer way. It strengthens the regulator's hand that if it rules in a pro consumer way, then it is less likely to be successfully challenged in court under a judicial review because the courts have already given a view subject to it going to the court." The decision has been hailed as 'seismic', impacting all lending commissions.