Martin Lewis explains what the car finance consultation means for you | News UK

The loophole meant those who purchased a second-hand vehicle were forced to foot the bill for an extra 25% commission.

Lewis said in a video posted to X that up to 14million motorists may get a share of the compensation pot.

He said: ‘Discretionary commission arrangements is when you went to a car broker or dealer and it increased the amount of interest that you were charged to increase its commission without telling you.

‘Now, the big problem with DCAs is that they were hidden. You didn’t know you had one.’

Who can claim compensation and how to get it

About 40% of people who bought a vehicle on a Personal Contract Purchase contract or Hire Purchase (not leasing) before January 28, 2021, paid the sneaky fees.

The financial guru said: ‘If you did so, you are likely to get compensation under the scheme.’

He added: ‘You might have had 0% interest, in which case you definitely might be paid out because there was no interest.

‘Or your commission might have been very small, in which case you won’t get anything back, although most people it’s going to be in the hundreds of pounds.’

The FCA will launch a consultation on the shoddy insurance in October, the MoneySavingExpert said, with payouts likely coming next year.

Lewis said however the redress scheme shapes up to be will probably be ‘simple’, with lenders reaching out to mis-sold customers and will either automatically pay people or ask them to sign up to the scheme.

Drivers who have already complained don’t need to do a single thing, Lewis said, but those worried they were not told about commission and paid more for insurance should do so.

The money expert said: ‘If you’re one of those people who’ve already had a letter saying that your car finance firm, after you complained, won’t deal with it till December this year, that will almost certainly now be delayed until next year.’

To complain, Lewis advised people to use a tool that generates a template email to submit a claim.

People don’t need to use a claims management firm to do this, he stressed: ‘The fact you’ve signed up with them may mean they get 30% of your payout without doing anything at all.’

The only exception to this is those who were coughing up ‘manifestly unfair commissions’, so the interest was 55% on the cost of credit, which was not disclosed.

Lewis said: ‘As that’s case by case, unlike the DCA cases, we don’t yet know whether that will be dealt with, on they’ll contact you and pay you back.

‘Or you may have to go through the ombudsman, because that one’s more complicated.’

The Supreme Court’s car finance ruling – what does it mean?

The compensation scheme follows a landmark ruling by the Supreme Court in favour of lenders, finding them not liable for hidden commission payments in car finance schemes.

Judges did not uphold an earlier Court of Appeal judgement, which led to DCAs being outlawed.

Out of three cases, judges upheld one consumer’s case. The two others – alleging that commissions paid to car dealers were bribes and that dealers owed a duty of loyalty to the customer – were rejected.

The justices argued that secret commissions are not automatically illegal and car dealers do not have a duty to act solely in the customer’s interest when arranging finance.

This drastically limited who can receive compensation, leaving one being floated by the FCA as the remaining option.

Yet Lewis warned that the industry ‘could fight this, and could fight it hard’.

‘Now I would urge people in the industry, this is a fair compromise,’ he added.

‘You’re going to be paying out far less than you would have done had the Supreme Court upheld what the Court of Appeal said.’

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