Martin Lewis reacts to new mis-sold car finance claims - "The new PPI?"

The Financial Conduct Authority (FCA) has put a pause on mis-sold car finance claims, after fears motorists are being wrongly rejected. Complaints received by firms on or after 17 November 2023 up to 25 September 2024 are on hold, while the financial regulator investigates if "there has been widespread misconduct" and whether consumers have "lost out".

Reacting to the news this morning, Martin Lewis tweeted:

“HUGE announcement from @theFCA this morning that has gone totally under the radar. It may mean a pay-out for millions who bought a car/van on Motor Finance before 2021.

“I’ve done back of the envelope numbers and at the top end this could be PPI type scale (that was £40bn), big enough to be a form of Quantitative easing (so real consequences for the next govt as it’ll likely take a year).

“It is to look at the handling of complaints about commissions when people got motor finance (pre 2021). Two big Ombudsman cases revealed today indicate that firms are falsely rejecting complaints and the FCA is now to do a full review of complaint handling.

“The FCA wouldn’t do this unless it was likely to find they were doing it wrong. So my suspicion is when it finishes its investigation it will (in order of likelihood) set up either

a) A redress scheme where it orders all the firms to pay redress to every effected customer even if they've not complained.

b) Redress rules where it orders them to pay out redress based on a set formula, to those that complain

“The pay out would be either the interest on loans (which is big), the commission (which is big), or the whole loan (which is huge). We're possibly talking thousands back for many.

“Clearly this means getting complaints in if you were mis-sold is going to be crucial especially if they choose scheme b) and there is a cut off involved.

“It should be noted part of the announcement is the FCA has put a freeze on firms handling complaints for now, so if you complain now they don’t have to do anything, but my provisional thoughts are it is worth people who think they’ve been mis-sold getting in a complaint now as a marker.

“So my team and I will be working on a full guide on how to do that which we’ll have out in the next couple of weeks to talk you through this step-by-step. Please watch this space and share with people who may have been impacted.”

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