A million motorists claim they were mis-sold car finance in ‘PPI-scale’ scandal
A million people think they have been mis-sold car finance with 30,000 motorists a day submitting complaints.
The figures come from a car finance mis-selling complaints tool launched by the Money Saving Expert website at the start of February. It is the latest indicator pointing to the scale of potentially “widespread misconduct” by car dealers and credit brokers who allegedly sold finance at higher interest rates in return for commissions from lenders between 2007 and 2021.
The Financial Conduct Authority (FCA) banned these “discretionary commission” incentives after finding that individual buyers were paying up to £1,100 over the odds on a £10,000, four-year finance package.
It is now investigating the practice – a process which experts have said could lead to large-scale compensation on the scale of PPI.
The FCA previously said there were thousands of complaints already lodged with the Financial Ombudsman, the mediator of financial disputes, while Lloyds Banking Group has set aside £450m to cover potential compensation claims. The bank had to pay almost £20bn over the PPI scandal.
The volume of complaints points to car finance mis-selling becoming one of the country’s biggest scandals in terms of payouts, according to Money Saving Expert founder Martin Lewis. He said: “The number of complaints in not much more than a month is staggering – off the charts – far more than I expected.”
“Even though we were at the vanguard of PPI and bank charge reclaiming, in terms of numbers of complaints, this feels like it is building up even more quickly.
“In value terms, car finance mis-selling is potentially going to be the second biggest reclaim payout in UK history – possibly over £10bn repaid – which could even provide a fillip to the economy as PPI did.”
The PPI (Payment Protection Insurance) scandal, in which millions of customers were mis-sold loan insurance, was one of Britain’s costliest retail financial scandals, with banks paying out around £40bn in compensation.
The FCA launched its investigation into car finance mis-selling in January. The deadline for dealing with complaints has been extended until the FCA reports its findings on September 25 2024.
Mr Lewis said it was “not surprising” that some firms were struggling to respond to complaints in good time. He added: “To frustrated complainers, I’d say for now we should be prepared to give companies some wriggle room on timings, but firms need to urgently step up their complaint handling resources.”
The most complained-to firms via MoneySavingExpert’s tool were Black Horse (16pc), Volkswagen Financial Services (14pc), Stellantis Financial Services (8pc) and Santander (8.2pc).
In January, the FOS ruled in favour of consumers in two cases against Barclays Partner Finance and Black Horse, which is owned by Lloyds Banking Group. A spokesman said the decision would “signal the way forward” for many more similar complaints that have yet to be resolved between drivers and car dealers.
More than 10,000 complaints have been made to the Financial Ombudsman Service (FOS) by drivers who believe they were overcharged.
Lloyds, Barclays, Volkswagen, Stellantis and Santander were approached for comment.
Mr Lewis has encouraged people to use the tool if they bought a car between 2007 and 2021, which could help explain the high numbers of complainants. In 2022, a government website crashed after he urged viewers to check their state pension entitlement.
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