Martin Lewis has revealed what type of compensation those affected by car finance Discretionary Commission Arrangements (DCA) could receive from September.
The Money Saving Expert founder suggested the previous precedent might not be followed with the Financial Conduct Authority (FCA) likely to “do something different”.
The finance guru has previously suggested every affected motorist could receive around £1,100 when the investigation is finalised.
However, Martin has now claimed payouts may not be as high as once thought in a potential blow to road users.
He now believes the FCA might rule that some interest paid by drivers was “fair” and therefore will not be owed back to consumers.
The money specialist warned that something similar was used to pay out compensation during the PPI payouts.
He made the revelation on the BBC’s Martin Lewis Podcast as he answered questions from concerned motorists.
Martin explained: “The previous precedent from the Ombudsman is that people were given back the difference between the interest they were charged with the commission added on top and the minimum interest that the lender would have allowed, which was typically £1,100 per car finance agreement.
“We don’t know that the regulator will follow suit, I have a feeling it might do something slightly different.
“For those that remember PPI I think it might go the Plevin route, that’s just for the nerds.
“I think it might say there’s a certain amount of interest which is deemed as fair so you will only get back the difference above that but we will have to wait and see.”
The Plevin case related to high levels of commission taken from PPI sales without the customer’s knowledge.
The ruling meant motorists were due the extra back if more than 50 percent of a customer’s PPI cost went as commission to the lender. It means the 50 percent fee was deemed acceptable with compensation paid above this threshold.
It has previously been estimated that 40 percent of car finance deals were sold with a DCA in place.
It means tons of motorists who purchased cars on finance deals between 2007 and 2021 are likely affected and could be owed money back.
The FCA has recently accepted it was “improbable” that they will find nothing as part of their motor finance probe.
Nikhil Rathi, chief executive of the FCA, has also confirmed the investigation into car firms will have a “more condensed time frame” than PPI.
