Martin Lewis reveals vehicle owners could be owed £1,000s

In January 2021, the Financial Conduct Authority (FCA) banned discretionary commission arrangements (DCAs). 

This stopped lenders allowing brokers (including car dealers) to increase interest rates on car finance.

Mr Lewis said millions of people across the UK had been caught out by this “unfair practice” prior to the change in 2021 without even knowing.

Speaking on the Martin Lewis Money Show on ITV, he said: “These finance firms let brokers and car dealers make up the interest rates, so they could charge more interest, so they got bunged more commission and they didn’t tell you that so you couldn’t negotiate.”

But now a major investigation has been launched by the FCA into the hidden and unfair car finance commission. 

The result, Mr Lewis explained, could be billions of pounds of overcharged interest paid back to millions of unknowing people across the UK. 

Who could be owed money for unfair DCAs?

Mr Lewis said: “The FCA estimates 95% of car finance deals had a commission model, and 40% the crucial ‘discretionary commission arrangements’.

“If yours did, and it wasn’t made clear – which it almost never was – we reckon you’re likely to be entitled to money back when the FCA finishes its investigation and un-pauses complaints.”

He added money could be paid back to people as early as September, but how do you know if that’s you?

Mr Lewis said, you are owed money if you:

• Bought a motor vehicle on finance (this includes cars, vans, campervans and motorbikes)
• The finance agreement was taken out before January 28, 2021 (and most likely after April 2007)
• The vehicle was for primarily personal use (not business use)

The Money Saving expert added you are also eligible to claim in the following circumstances:

• You can reclaim on behalf of someone who has passed away
• It includes Personal Contract Purchases (PCP) and hire purchase
• You can still claim if the car’s now paid off and the agreement is over, even if the car was repossessed
• You can claim even if you’ve already submitted a claim for diesel emissions (this is a separate issue)

Money Saving Expert’s free car finance DCA tool

To help people with their claims, Mr Lewis and the team at Money Saving Expert have come up with an online tool (which can be found here).

This tool will build an email for you, drafted by Mr Lewis with feedback from lawyers and regulators for you to send.

All you have to do is answer a few questions.

Car finance reclaiming update. Staggeringly after just 1 full day of our free complaint tool being live…

262,500 complaint emails have been sent
It’s estimated 40% will’ve had hidden commission
Typical overcharge was £1,100 per agreement

So predicted payout’ll be £115,000,000…

— Martin Lewis (@MartinSLewis) February 8, 2024

Mr Lewis explained the complaint should then be made to the lender that provided the car finance so the firm you paid each month, not the broker/car dealer. 

After just one day of the free tool going live, more than 262,500 complaint emails were sent.

How much could you be repaid?

The FCA has not yet officially revealed how much people affected by DCAs will be repaid.

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Mr Lewis said: “It could decide all the interest should be repaid, or only a fixed percentage above a fair amount – for now, we don’t know.”

He said since the FCA banned discretionary commission arrangements in January 2021, the Financial Ombudsman Service has received more than 8,000 complaints.

One example he used saw the claimant, who had paid 5.5% interest over five years when the cheapest rate available was 2.49%, receive £1,147, which was the difference in commission, plus interest.