A TOP lawyer has revealed who is eligible for compensation amid the spiralling car finance scandal.
Coby Benson estimates that motorists are likely due “billions” in compensation over unfair deals which saw them overpaying on their loans.
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Coby sat down with Sun Motors in the wake of the Financial Conduct Authority (FCA) announcing an investigation into potential malpractice in the car finance sector.
His firm, Bott & Co, was the one that brought the court case that shone a light on the shady dealings.
He explained that, per the firm’s estimates, “millions” of drivers could be affected, dubbing the storm the “next PPI”.
The legal whizz told The Sun: “Brokers had discretion to change the interest rate [on the loan].
“The only reason they would do that was in order to earn more commission for themselves.
“It was never for the benefit of the customer and they never knew what was going on.
What is the FCA investigating and who is eligible for compensation?
What is being investigated?
The FCA announced in January that it would investigate allegations of “widespread misconduct” related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers – usually the finance arm of a dealership.
These brokers earn money in the form of commission – a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
You can check whether you might be owed money and submit a complaint using Martin Lewis’ free tool here.
“They could look at their own finance documents and not have a clue what was going on.”
Coby also revealed who might be eligible for compensation, with the average payout expected to top £1,000.
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He added: “Nobody yet knows for certain what the scale is.
“The main reason for that is that lenders have been really shy about admitting exactly how many of their customers were affected.
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“If somebody has taken out finance since around 2007, then they potentially have a complaint.
“It applies predominantly to Personal Contract Purchase and Hire Purchase agreements.
“It isn’t thought to apply to Personal Contract Hire.
“So the best way to know if you were potentially affected by this is if you were paying a monthly amount then you either owned the vehicle at the end…or there was an option to purchase the vehicle at the end.”
However, he explained that the only way to know for sure whether you had overpaid on your loan was to submit a complaint to your lender.
This can be done by sending a letter requesting more information and outlining your case.
You can use a free tool to help find out who your lender is and draft your letter on Bott & Co’s website, as well as Martin Lewis’ MoneySavingExpert page.
We knew full well what we were doing was wrong
Car finance whistleblower
Coby outlined the next steps if you discover your deal was affected.
He explained: “If you write to your lender now and the lender comes back saying you were one of the people affected…your claim will now be put on hold.
“The lender will have eight weeks from September 25 [when the FCA is set to release its report] to respond fully to your complaint.
“They will either admit it and pay you some sort of compensation or continue to dispute it.
“We’re hoping the FCA is going to step in with new rules and new guidance and put a stop to the blanket approach of just denying every claim.”
Even if your claim is rejected, you will have a further 15 months from receiving the final decision to appeal it to the Financial Ombudsman.
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It comes after whistleblowers from within the car industry revealed exclusively to The Sun that “ridiculous” rip-offs were encouraged by bosses.
One even said: “We knew full well what we were doing, and the practice was encouraged by the firm.”
