Discretionary Commission Arrangements - Complaints and Refunds

You do not need to use a Claims Management Company. You can make the claim directly to the lender and if they reject your complaint you can take it to the Financial Ombudsman Service free of charge, but you must do this within 6 months of the lenders Final Decision Letter.

Mis-sold PCP Car Finance and the FCA

Nearly all financial companies in the UK are regulated by the FCA (Financial Conduct Authority). This includes anyone who is offering credit to consumers, so all car dealers and car finance companies will be included.

The FCA are regulate and control what and how financial services companies operate. If a company has been unfair to a customer, then the FCA can force them to put things right, via the FOS (Financial Ombudsman Service).

The FCA has been concerned, for several years, about how the motor finance industry has been operating. It undertook a review of the industry and as a result new laws were introduced to protect consumers. Of course, new laws can only affect consumers looking forward for new car finance agreements, it can’t force change looking backwards at old car finance agreements.

In its report, the FCA discovered that a typical motor finance agreement of £10,000, the commission paid out by the finance company could mean that the customer was paying £1,100 more in interest over a typical 4-year term of an agreement.

A ban on discretionary commission was introduced in July 2020 and came into force on 28th January 2021.

The FCA estimates that this will result in a saving to consumers of £165,000,000!

The FCA noted, in its final report, that some lenders “seemed to focus unduly on credit risk (risk to the lender) and not on affordability (to the customer). The FCA went on to say

“Unknown to customers buying vehicles, lenders systematically incentivised brokers and car dealers to charge their customers higher interest rates so they could receive higher commissions themselves.”

In an Autocar Article published on 28th January 2021, one dealer stated:

“Button F, we called it. The F stood for finance and was the key on our calculators that let us car salespeople adjust the interest rate on customer loans in order to boost our commission.

Depending on the value of the deal and the APR we were able to get away with, this commission – after the dealership had taken its cut – could equal what we earned on the sale of the car itself.

Our customers knew none of this, of course. They assumed that our frantic tapping’s were an effort to secure them the most favourable lending terms. Once a month, the finance company’s representative would arrive to thank us for our business and buy us all a round of fish and chips. The more successful of us (never me) would get a trip to the races.”

Plainly it is disgraceful that yet again the UK consumers were being ripped off by organisations they believed they could trust. While the FCA have done a fantastic job in ensuring that commission is not hidden for new finance agreements, consumers can make a complaint about past agreements. This is something you can you yourself (you don’t need to use a Claims Management Company), but if you do not want to do it on yoru own, then Redbridge Finance can help.