Martin Lewis, the money-saving expert, has issued a stark warning to anyone who bought a car before 2021.
TV’s money-saving expert Lewis is always on hand to offer us some of the most prescient advice.
And this week, it’s motorists who are being blessed with Lewis’ wisdom.
He’s offered a serious warning to people who bought their car before 2021 – and not following it could seriously cost you.
In January 2021, the Financial Conduct Authority changed the law so that firms could no longer receive commissions linked to the interest rate that the customer paid.
And this week, the FCA announced that it would be launching an investigation following ‘more than 10,000’ reports to the independent complaints arbitrator, the Financial Ombudsman Service (FOS).
As per The Independent, Sheldon Mills, executive director of consumers and competition at the FCA, said: “We are taking a closer look at historical discretionary commission arrangements in the motor finance market following a high number of complaints from customers, which are being rejected by firms.
“If we find widespread misconduct, we will act to make sure people are compensated in an orderly, consistent and efficient way.”
Because of the timings of the change in law, this could mean millions of people who bought their vehicle on finance before 2021 were mis-sold their car finance.
And these people could be due a large payout.
In response to the FCA’s news, Lewis says: “HUGE announcement from @theFCA this morning that has gone totally under the radar. It may mean a payout 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 [a] PPI-type scale (that was £40 billion), big enough to be a form of quantitative easing (so real consequences for the next Government as it’ll likely take a year).”
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Lewis goes on: “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 affected 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 payout 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.”
Lewis has made a promise to follow up on his response with a full guide on what you should do if you believe you may have been affected.
So if you bought a car before 2021, keep an eye on his X (formerly Twitter) feed!