Pod Insights The Martin Lewis Podcast URGENT MINI POD: Car finance mis-selling confirmed: Will you get your money back? About this episode In a special, urgent edition of the podcast, Martin explains what you need to know right now - as the financial regulator sets out its redress scheme for millions of motorists who were mis-sold finance deals.
The scheme will apply to more than 12 million deals - and will cost lenders 9.1 BILLION pounds.
So - who is included? Should you put in a complaint now? What vehicles are eligible? How do I know if it was mis-sold? Martin answers all those questions - and more.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:57 Martin Lewis? Hello and welcome to this special car finance misselling episode of the Martin Lewis podcast. The regulator, the FCA, has just announced that 12 million agreements were missold and the average payout will be £830. That's a slightly bigger average payout and a slightly lower number of agreements than we thought, so the total payout is now thought to be around nine billion, whereas it was 11 billion previously. So to get you through this, as this is not long after the announcement, I've just done a news interview on Radio 5 with Claire McDonald. She spoke and had a clip from the boss of the FCA first, so I'm going to play you that and I'm going to go into it with more detail just between us, podcast only afterwards.
1:39 Speaker 02 This is Five Live Drive with Claire McDonald and Chris Warburton. Listen on BBC Sounds.
1:47 Speaker 03 Thanks so much for joining us. It is Five Live Drive. It's Chris and it's Claire. Good to have your company. Let's talk about this. Millions of drivers who were missold car financed between April 2007 and November 2024 will get an average payout of £829. A new scheme has been announced this afternoon by the Financial Conduct Authority, but the rules are being tightened up, so only those who were treated unfairly will be eligible. Nikhil Rafi is the chief executive of the Financial Conduct Authority.
2:20 Speaker 04 We think this is the quickest, fairest, most cost-effective way for consumers to receive compensation. It's free to use. If consumers went to court, they may well pay fees and end up getting less than the scheme. In some cases, they may get more, but we don't think that is especially likely.
2:37 Speaker 03 Delighted to say we can talk now to money-saving expert Martin Lewis. Evening, Martin.
2:42 Martin Lewis? Good evening. Hello.
2:43 Speaker 03 So what everybody wants to know now, if this is me, what is this new information? And what do I have to do now?
2:50 Martin Lewis? Well, there's a lot of nitty-gritty changes in this, but I'll keep it to the big picture. So effectively, the most important thing to understand is this is a mass redress scheme, and stress on the word mass. That's because not only will firms have to compensate those people who were mis-sold who complain, and a lot of people have complained through my own free tool on my site, we've had 3.6 million complaints by that alone, but they will also have to identify other people who were mis-sold car finance between 2007 and 2024, contact them and tell them that they are eligible for money too. And that's the nature of mass. But the most important thing you need to understand is you want to be
3:32 Martin Lewis? in the I've complained group. And there are three reasons for that. First of all, your payout will be quicker, likely in 2026, not 2027. Secondly, if you haven't complained and the firm doesn't have your car finance agreement and you do, you will miss out. And third, you may have moved house, or you might have even moved house three or four times, you might have changed name if you got married, and all of those things, the firm might not be able to contact you. Whereas if you complain, you can put in all of your details. So if you want to do this, and you're going to use the mass redress scheme, you want to be in that complained group. And this applies, so here's the is it me? If you got car finance,
4:12 Martin Lewis? specifically PCP or HP car finance, from April 2007 to November 2024, but it's not just car, it's all motor vehicles, so it's car, it's vans, it's motorbikes, it's camper vans, but it's not caravans because they don't have a motor, then you may well have been mis-sold. And here's the bit of brain twist for everyone. One of the key definitions of misselling is they did one of three different types of misselling and they didn't declare it to you, they didn't tell you, you won't know, you can't know if you were missold. So the only way to know if you were missold right now is to complain. So to know if you've got a complaint, you have to complain. You
4:57 Martin Lewis? don't have any other way. So again, I go back to my big message, go and get, if you want to use this scheme as opposed to go to court, go and get a free complaint in, do it now. There are three tools online, including mine, a money-saving expert that can do this for you.
5:13 Speaker 03 So you really have to complain. If you haven't complained, will you hear from anybody? I mean,
5:17 Martin Lewis? Well, if you haven't complained, they are supposed to, and the FCA will be pushing them hard to identify everybody who was missold, and over a longer time period, contact you and give you the same amount of money. But clearly, there are logistical details in doing that. You know, finding car finance agreements, due to data protection, they often shred them, buy away a quick tip. If you download the Equifax app, not the paid one, set up a free basic account, it has a car finance searcher that will try and find you all your car finance agreement details back to 2007, and then you can put those into a free tool. So all of that is the right thing to do here. Just a quick note for anyone who has already complained. If you put a complaint in, you are in that
6:00 Martin Lewis? complaint category. Now, you must still be in that complaint category, even if you put a complaint in and were told you didn't have a complaint. And I know it's tortologist, let me try and explain. So until the middle of last year, the main type of complaint was what's called a discretionary commission arrangement. That's where your car finance broker could increase the interest you got, and it would get more commission, or the lender would increase the interest, so it could pay out more commission and you weren't told it. That's called a DCA. Now, all the original letters that were coming out, and the template letters, were all saying, did I have a discretionary commission arrangement? If you didn't, you would have got a letter back saying you were not missold.
6:44 Martin Lewis? But then last year, the Supreme Court effectively, the FCA has characterised two other forms of mis-selling. One is contractual ties. That's where you were given a car finance and you were effectively thought you were going to get the best deal from a panel of lenders, but they didn't take you to a panel of lenders. They just had a tied lender who always gave you your finance, or they had a lender who had first call. And the second, if the level of commission was too high. So there are three types of mis-selling. Most people who've been told they don't have a complaint have only been told they don't have a DCA complaint. But the rule is, if you've put in a complaint, then the lenders will now have to examine you for the other two categories as well, without you doing anything more. So if you put in a complaint
7:27 Martin Lewis? and it's been acknowledged, you're in the complaint camp, which is the camp I want you to be in, because that means everything will be done quicker and easier. And of course, if your address changes or your name changes since, do notify them.
7:38 Speaker 03 Okay, right. So get the complaint in, it is the overriding advice. What do you make to the Financial Conduct Authority's statement? Obviously, the range and scope is smaller than we thought it would be. What do you make to the parameters of this payout?
7:55 Martin Lewis? There's some good and bad here. One of the things I've been lobbying about is the size of the payout. I think it's pretty fair to say if you went to court, based on what the Supreme Court did last year, you would get a bigger payout than under this mass redress scheme. But of course, far fewer people would get it. It's more difficult to do, and you'd have to pay someone 30% usually to do it. So we've been lobbying especially over the interest rate. They have effectively increased the compensatory interest rate. That's one of the main reasons the payout is now averaging £830, not £700. There's also slightly more money for older agreements. The things they've taken out of scope, there is a level of fairness here. Effectively, they've taken out of scope people who would have got compensation that put them in a better position than they would have been in the best position
8:39 Martin Lewis? in the marketplace. I am digging in the details at the moment to exactly what that means. So I don't want to give you a fine judgment. The most interesting thing I've seen so far, though, and this is fascinating, because, you know, many people are seeing this as the end game. There will now be a three-month implementation period, then you'll start getting your letters from the banks telling you your owed money. But there is a concern over judicial review, and over finance firms especially, taking the regulator to court, saying the scheme is unfair.
9:08 Martin Lewis? Concern is over cases between 2007 and 2014, which they are arguing should not be in scope and the regulator has put them in scope. So you can complain. And what it's done technically, when you read this, it's actually cut split this into two identical schemes, one scheme for 2007 to 2014 agreements, and it's the date they start that counts, one scheme for 2014 to 2024 agreements. The reason it has split that in two is if there is a judicial review, it's far more likely to be on the earlier ones. So a judicial review would mean those earlier cases would go on hold, but by splitting it, they could continue with the scheme for the 2014 to 2024 cases without putting them on hold because
9:50 Martin Lewis? technically now there are two car finance reclaiming schemes on a different date. So, you know, the all that type of detail is what I'm in the middle of reading through now. It's only been an hour and my team and I were absolutely cracking down and updating our templates. But there's a lot of interesting stuff on this.
10:06 Speaker 03 Can I throw some questions at you from our listeners, Martin? And there's quite a few of them. So we'll try and get through as many as we can. Tony says this question for Martin, please. Tony from Halifax. I've been told by Land Rover that they paid two discretionary commission commissions at values of 4,000 in total to my dealer. Will I be entitled to the full 4,000 back? Or will it be a percentage? Says Tony.
10:29 Martin Lewis? It's way more complicated. They have a balancing calculation. It depends on the year that you got it. You will be entitled to some money back. I think it's very unlikely you'll be entitled to the 4,000 pounds back. It's about prevailing market rates of interest and the percentage of the commission that comes out. And it's called a hybrid calculation. I would think though, that's large. I would, I'd probably be thinking you'll be somewhere around the thousand pound mark, but that's pure guesswork. We, you know, there's so many different factors in here. I can't answer it.
10:58 Speaker 03 Okay. Sophie says, I previously instructed a company to look into a potential claim as I didn't realise I could do it myself. What do I do now? Do I carry on with a claim with the misold finance expert? Or can she back out?
11:12 Martin Lewis? So one of the things I'm frustrated about is I don't believe the regulator has given strong enough guidance on this. Claims firms, some of them are actually regulated by the FCA, the same regulator that is doing car finance, some of them are regulated by the Solicitors Regulatory Authority. We've been putting them very hard and all they say is, if you want to cancel with a claims firm, the charges that they give you for cancelling must be reasonable. And when you ask what reasonable is, they say reasonable, which is obviously a bit circular. So you need to talk to the firm about what it would cost you to cancel and when you would have to pay it. Because of course these payouts won't be coming later in the year, but if you cancel, some of them might want an upfront fee now before you know whether you're getting paid or not.
11:57 Martin Lewis? Now, if you believe it isn't reasonable, you could not cancel but make a formal complaint and then take them to either the Solicitors Regulatory Authority if they regulate them or the Claims Ombudsman, which is part of the Financial Ombudsman, if they regulate them. But by the complexity of my answer, you'll hear me saying it isn't as simple as it should be.
12:17 Speaker 03 Yeah, yeah, listen, there's so many, let's just maybe try and squeeze one more in.
12:20 Martin Lewis? And I get one more, just one more thing.
12:22 Speaker 03 Oh, go on.
12:23 Martin Lewis? Someone mentioned someone who'd passed away earlier. Just a really important note, that people who have passed away, their finance is in scope. So if someone was mis-sold and has passed away, the primary beneficiary or the executor, and you will need to prove it, can take up that complaint and will be owed money. One of my concerns that I have not had answered by the regulator yet is, how will firms identify somebody who's passed away's case of mis-selling and contact? So I think if somebody has passed away, you really, really want to be in that complained camp, primary beneficiary or executor of the will, you'll need to prove it and you will be owed money. And other things, if you paid the car off, you're owed money. You know, if you paid it off early, if you were charged some interest, you may be owed
13:08 Martin Lewis? money. Obviously, you're only owed if you were mis-sold and it's important for me to say, 35% of those car finance agreements, PCP or HP, between 2007 and 2024 are thought to have been mis-sold, which does of course mean that, you know, 65% weren't mis-sold. So I was saying complaint so you can find out, but don't assume just because you had car finance, you were mis-sold.
13:31 Speaker 03 And a really quick one finally from John who says, when I purchased my used Toyota [4.76 from a dealership, I actually asked if I could have their finance. Can I make a [8.44 claim? Does it matter if you actually asked it? Or is it just all about the transparency [12.21 that they had with you?
13:45 Martin Lewis? It's about the transparency that they had with you generally. You asked for their [17.44 finance, most people would have been because they thought that was the best. But it depends. [21.21 So there's two, there's three types of misselling. We're going to turn this into a podcast, we'll [25.61 get out soon and I'll explain them in detail when we do that, the three types of misselling. [29.43 And then you have to be not disclosed if they did one of those three types. So it's [34.40 sort of a two-part question.
14:07 Speaker 03 Brilliant. Thank you as ever, Martin. Really appreciate you taking the time to [39.76 come on and answer the listeners' questions. Have a great evening.
14:13 Martin Lewis? Okay, so that's me on Five Live, rushed through news interview. Now I want to give [46.72 you a little bit more, but a caveat before I start, we're only just over an hour after [51.32 the FCA did its announcement. There are a lot of documents and I've got lots of questions. [55.68 So please give me a bit of wriggle room. I haven't dotted every i and crossed every [59.92 t on this, but I hope most of what I say will be spot on. Let's start by explaining [65.92 the three different types of misselling. The biggest one is discretionary commission [71.12 arrangements. That's the majority of agreements. And of course, you could have been missold [74.64 in more than one way on an agreement. So the total number of agreements that were [79.56 missold is lower than if you added up the different, each type of misselling. But I'll [83.44 digress. Let's get on with what it is. Discretionary commission arrangements is where the lender [89.44 would pay a broker or dealer more commission if it increased the interest rate. Simple [94.48 as that. And you weren't told. Remember that point? All of these are about it wasn't [98.64 disclosed to you. The next one is unfairly high commission. And that is defined as 39% [106.24 or more of the cost of credit, or interest in most cases, was made up of commission. [111.84 Now, interestingly, before today, that was 35%. So that that criteria has gone up a [115.72 little bit. And 10%, over 10% of the total cost of the loan was commission. It has to [121.52 be both. That's me on Five Live, rushed through news interview. Now I want to give you a little bit more, but a caveat before I start. We're only just over an hour after the FCA did its announcement. There are a lot of documents and I've got lots of questions. So please give me a bit of wriggle room. I haven't dotted every i and crossed every t on this. But I hope most of what I say will be spot on. Let's start by explaining the three different types of misselling. The biggest one is discretionary commission arrangements. That's the majority of agreements. And of course, you could have been missold in more than one way on an agreement. So the total number of agreements that were missold is lower than if you added up the different, each type of misselling. But I'll digress, let's get on with what it is.
14:56 Martin Lewis? Discretionary commission arrangements is where the lender would pay a broker or dealer more commission if it increased the interest rate. Simple as that, and you weren't told, remember that point? All of these are about it wasn't disclosed to you. The next one is unfairly high commission. And that is defined as 39% or more of the cost of credit, or interest in most cases, was made up of commission. Now, interestingly, before today, that was 35%. So that that criteria has gone up a little bit. And 10%, over 10% of the total cost of the loan was commission. It has to be both. The final category, and this one has had quite a big change, is contractual ties.
15:39 Martin Lewis? Now, that is where, when you went to get your car financed, the broker intimated to you that you were going, or you thought there would be a panel of lenders, and you know, it'd be giving you the best deal, but in reality, there was only either one lender, or one lender had first call, not because it was right for you, but because it was right for them on your custom, and that's called a contractual tie. And those are the three different types of mis-selling. Now, one of the big changes today is that contractual ties, if it was with the obvious finance firm, so what do I mean by that? You're with a Volkswagen dealer and it was Volkswagen Finance, you're with a Toyota dealer and it was Toyota Finance, you're with a Ford dealer and it was Ford Finance, you get the point?
16:22 Martin Lewis? They have effectively been excluded from contractual time mis-selling. You might still be DCA mis-sold, you might still be unfairly high commission mis-sold, but in practice, you won't be contractual tied, because the argument is, it was pretty obvious they were going to give you the finance of that dealer. That is one of the big changes today, and that's the main reason the number of agreements that were mis-sold has dropped.
16:46 Martin Lewis? Next point, I've talked about the fact that you should complain. What many people ask me is, I've already complained, what do I do? So, in most cases, you're done. As long as you want to go through the FCA route and not go through the court route, you don't have to do anything. Now, the obvious case is you put in a complaint about a discretionary commission arrangement, and it told you you had a DCA, well, then you're waiting. If you put in a case about a discretionary commission arrangement, and it said you don't have a complaint, well, actually, as far as we know at the moment, you still don't need to do anything. That's because most people who put in those complaints, put them in before the Supreme Court ruling last year, which is where we got the extra two types of mis-selling,
17:31 Martin Lewis? contractual ties and unfairly high commission. And what we think the regulator is saying is, if you put in a complaint on DCAs, even if you didn't have a DCA, then lenders will now have to look at your complaint for the other two types of mis-selling as well. In fact, we know they will. What I'm just double-checking is that they haven't changed the fact that you will count as the, the "I've complained" group, so that you are already... Opted in, opted out, you would have to opt out, you're in it by default. I don't think it has changed it, but I am double checking that, that's one of the things. So I'll put something out if I'm wrong on that, but I'm so pretty sure if you put in a complaint, as long as they've acknowledged complaint, whatever your circumstance, you're in that complaint category.
18:15 Martin Lewis? Quick word on interest rates, I'm pleased on this because this is one of the things I was lobbying on that I thought it wasn't fair. Until today, the compensatory interest, so this isn't the interest you paid. This is the compensation interest you will get from, you know, having been mis-sold 10 years ago and waiting to get your money back, or 20 years ago. Until today, it was the Bank of England base rate plus 1%, which is very low and it's not compounded, so it's that a flat rate each year. So it's the Bank of England base rate for the year, each year. Now, it's the Bank of England base rate plus 1%, so the same, but with a minimum 3% for the year.
18:53 Martin Lewis? So yeah, you would be better off in every year from 2009 to 2022, under the minimum 3%. So that will actually is one of the reasons why the level of payout is higher. And then the final category, I'm not going to do too many on these because I'm still working through them, is exclusions. So the big exclusion is the one I've already mentioned. Contractual ties to a lender who are the obvious lender, you know, the finance firm of the dealership. But there are some others for people who had very low levels of commission, you won't get your money back. Or if your commission, you'd get back more money than would put you in a better place than you would have been in an open market. You won't get money back. And all of these have reduced the number of people getting commission slightly.
19:37 Martin Lewis? I will be working through all this in more detail. If you haven't put a complaint in, put a complaint in, but hopefully this is a decent enough summary. An hour afterwards, after a very big document that it gives you an idea of what's going on. But I'll be putting more stuff out of it on my other channels as well. Thank you very much for listening. That's it for this special edition of the podcast.
19:58 Martin Lewis? Now, just as I thought I'd finished recording that, I've got a message from the regulator saying that if you have been rejected for a discretionary commission arrangement, you've had a full rejection, while they will have to look at your complaint, you will be on the longer time span. That's the 2027 payouts, not the 2026 payouts. So if you have been rejected for a DCA, I would put in a new complaint asking now so that you're in the quicker scheme and I'll be working through that over the next hour or so to work out exactly what you do do.
20:47 Speaker 05 Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected] . The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.
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