Scale of car finance scandal revealed in new research
The scale of the car finance commission scandal has been revealed with new research finding that only 21% of car finance customers were told their dealers could be earning commission.
Consumer Voice surveyed 2,042 motorists who secured car finance before the 2021 ban on discretionary commission arrangements (DCAs).
It found that 64% believed the dealer was only profiting from the sale of the vehicle, 56% assumed their loan interest rate was based solely on their credit history, while only 21% knew their dealer could be receiving commission.
Meanwhile, 56% were offered only one car finance deal by their dealer, with 44% stating that the dealer did not consider multiple lenders. A further 25% were unsure whether other loan options had been explored.
Car finance compensation
Alex Neill, co-founder of Consumer Voice said: ‘The regulator has given its strongest signal to date that compensation is owed on a widespread scale to UK motorists. But there are still some big questions remaining, including whether all secret commissions deals will be included and what the level of compensation will be.
“All eyes will now be on the forthcoming Supreme Court case to provide the blueprint for any redress scheme.”
The research comes after a Court of Appeal ruling in October found that Close Brothers and MotoNovo owner FirstRand mis-sold car finance by not informing customers of commission arrangements.
Experts believe the ruling could cost dealerships and lenders up to £25bn, with millions of drivers due compensation.
Appeal
However, Close Brothers and MotoNovo are appealing the decision in the Supreme Court next month with a decision expected later in the spring.
The Financial Conduct Authority and National Federation of Dealers Association have both been permitted to intervene in the court, but the Supreme Court rejected an unusual intervention from the government, which was worried huge amounts of redress payments could upset the car market and make it less competitive.
