Martin Lewis has informed viewers that all motorists who purchased a vehicle on finance could be eligible for an average payout of £1,100 if an ongoing investigation rules in their favour. The Financial Conduct Authority (FCA) is currently probing the practice where lenders permitted car dealers or those arranging the loan to alter the interest rates offered to customers for car finance.
This was known as a discretionary commission arrangement (DCA) and it may have been applied to a person’s loan without their knowledge. The FCA outlawed this in 2021 but there have since been numerous complaints from customers about the charges they incurred prior to the ban.
Most of these have been dismissed by the brokers, primarily car dealers, but the FCA investigation, due to report back in May 2025, will determine if this is fair. Mr Lewis clarified: “It was about discretionary commission arrangements. That’s what lenders said to car dealers and brokers. You can make up the interest rate, and if you push it higher, we will give you more commission.”
“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? ” “Well, the average payout if it happens and it’s not certain it will happen, would be 1100 pounds. This is for personal motor vehicles, cars, vans, motorbikes and camper vans, not static caravans.”
Renowned financial guru Martin Lewis has highlighted that individuals could be eligible for potential claims if they purchased vehicles using personal contract plans or hire purchase agreements but not leases, and this applies to transactions between April 2007 and January 28, 2021. This period is significant because it was when the Financial Conduct Authority (FCA) put a stop to discretionary commission models, commonly referred to as DCAs.
The absence of the DCA listing implies customers must be proactive in querying their arrangements. Mr. Lewis advised: “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.”
He insists on urgency, stating, “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 reassures that no-cost alternatives exist to ‘no win no fee’ solicitors, such as free tools available online—a sentiment echoed by the over 2.4 million individuals who have successfully used the tool on the Money Saving Expert website.
Mr. Lewis notes the Court of Appeal’s stance that car firms can’t earn commissions without obtaining the customer’s fully informed consent. Detailing the implications, he says: “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.”
The latest court ruling has empowered consumers and bolstered the regulator’s position against potential challenges, as one expert elucidated: “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.”
He lauded the decision as ‘seismic’, noting its impact on all lending commissions.
For more details on the FCA investigation click here.
To use the Money Saving Expert car finance reclaim tool click here.
