The Financial Conduct Authority (FCA) is launching an investigation into potential compensation for individuals who feel they were overcharged for car loans.
The regulator aims to address the surge in complaints from around 10,000 people, with more expected, related to commission arrangements between lenders and car dealers.
Previously, some lenders permitted dealers to adjust interest rates, increasing their commission. This setup incentivised brokers to inflate the costs of car loans for consumers.
In response to this issue, the FCA banned discretionary commission arrangements in 2021, projecting annual savings of £165 million for drivers.
Despite the ban, a substantial number of customers filed complaints seeking compensation for commission arrangements predating the prohibition. The Financial Ombudsman and county courts have already ruled in favour of customers in some cases, prompting concerns about disorderly outcomes.
To prevent chaos and ensure a systematic and efficient resolution, the FCA has initiated a 37-week pause on the process. This pause applies to complaints concerning motor finance agreements with discretionary commission arrangements received by firms between November 17 of the previous year and September 25 of the current year.
Consumers may also have an extended 15-month window to refer their complaints to the ombudsman, depending on the timing of the firm's final response.
