Car finance scandal branded 'an unholy mess'

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The car finance scandal has caused outrage with lenders and dealers being accused of hidden commission payments. This mess has left customers feeling defrauded while companies have been questioned about transparency. The Financial Conduct Authority (FCA) has informed dissatisfied car buyers that they can complain if they feel their loan was mis-sold, and thousands have already done so.

Each year, approximately two million cars are sold through finance agreements where customers pay an initial deposit followed by monthly repayments plus interest. The FCA is currently considering whether car buyers should be compensated if car dealers received more commission from lenders based on the interest rate charged.

Following a Court of Appeal ruling, this scandal has been widened to include other forms of “hidden” commission payments. The possibility of millions of drivers receiving pay-outs has left banks setting aside hundreds of millions of pounds for compensation claims. However, a murky storyline has unfolded as car buyers were unaware that dealers received higher commissions because of higher interest rates.

Lawyers for car buyers have called for the cases to proceed on the basis of the Court of Appeal ruling. Still, the FCA’s Chief Executive Nikhil Rathi is more tentative and acknowledges that the courts have different interpretations of the law regarding fixed commissions. Nevertheless, Mr Rathi has disclosed that other big-ticket purchases made on finance could come under the regulator’s microscope.

Notably, the FCA is looking into a structured redress system that would require customers to complain or ensure firms automatically pay compensation. A more attuned vision of the issue will come next year. The car finance scandal could, in turn, set an important precedent for compensation schemes as it draws closer in size to the Payment Protection Insurance (PPI) scandal

Read the full article from The BBC here: Read More

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