FCA Reviews Landmark Car Finance Ruling, Potentially Unlocking Millions in Consumer Compensation

The Financial Conduct Authority (FCA) is re-evaluating the car finance industry following a powerful Court of Appeal ruling that sides with consumers, shaking the foundation of commission-based car finance sales. The recent judgment declares it unlawful for car finance dealers to receive commission payments from lenders without first obtaining informed consent from the customer, a decision that could pave the way for widespread consumer compensation claims.

The FCA has been investigating discretionary commission arrangements in car finance, where dealers and brokers could raise interest rates on loans to increase their commission earnings. These practices, which allowed customers to be overcharged unknowingly, were banned in 2021. However, the Court of Appeal ruling extends beyond discretionary commissions, sparking concerns that many more consumers may have been misled about the fees they paid.

An Expanding FCA Investigation

The regulator is “carefully considering” the implications of this ruling, which could increase the scale of compensation owed to customers. The FCA is now consulting on whether to extend the time frame that motor finance firms have to handle complaints related to potentially unlawful commissions.

Alex Neill, co-founder of Consumer Voice, highlights the significance of this development, saying, “The financial regulator has signalled it will allow motor finance providers more time to consider how to deal with complaints about all secret commissions, not just those that are discretionary. This is big news for consumers as it could mean significantly more money is owed to more people.”

Neill further urged consumers to question any commissions applied to their loans: “Anyone who has been told by their finance provider that they didn’t have discretionary commission on their loan should now be asking if any commission was applied at all. If it was, they may be owed compensation.”

Consumers Encouraged to Take Action

As the FCA reviews its position and considers extending complaint deadlines, impacted consumers are encouraged to act. Consumer rights groups have made template letters available to help individuals request clarity from their finance providers and submit claims if necessary. This decision marks a turning point for thousands of car finance customers who may have unknowingly overpaid, potentially unlocking millions in compensation.

Stay informed and access our updated resources to assist in raising a complaint with your car finance provider if you believe undisclosed commissions may have affected your loan.