Car Loans that are mis-sold due to secret commission earned by the dealer when arranging the finance has been in the news recently see our mis-sold car finance page.  As a leading law firm specialising in financial mis-selling claims R James Hutcheon Solicitors has yesterday been reported in The Sunday Times in relation to our client Alistair Chong who was charged an 11.4% interest rate on a £25,000 Audi A5, far higher than the current prevailing rates.  These financial arrangements highlight the lack of transparency in these finance car loan deals. Our Client who is currently awaiting the outcome of his mis-selling claim, underscores the need for greater industry transparency.

Recent Compensation Claims For Secret Commissions

The issue of mis-sold car financial mis-selling in the UK centre’s around  discretionary commission arrangements by lenders. These arrangements, now deemed unfair, allowed dealers to earn more commission by charging borrowers higher interest rates. The Financial Conduct Authority (FCA) has begun an investigation into these practices, and the Financial Ombudsman Service has ordered some banks to refund the difference between the rates borrowers paid and the lowest available rate at the time due to unfair discretionary commission.

In specific cases, Lloyds and Barclays were ordered to refund borrowers the difference in interest paid. For instance, a Lloyds borrower who bought a £7,619 car and paid 5.5% interest ended up paying £1,147 more than the lowest rate available (2.49%), while a Barclays borrower who took a £13,333 loan for a £19,133 car and paid 4.67% interest paid £1,327 more than the cheapest rate of 2.68%.

Banks are reviewing these ombudsman decisions and working with the FCA. The lenders are partly liable under Section 56 of the 1974 Consumer Credit Act, which holds them responsible for the actions of dealers or brokers and for devising the commission structures.

To determine if you were affected by mis-sold car finance due to discretionary commission, you should inquire with your lender or seek expert legal advice from us. The FCA has paused the requirement for lenders to respond to complaints during its investigation, but the process can still be initiated. Complaints with the ombudsman will continue to be investigated. The likelihood of mis-selling is higher with higher interest rates.  Consumers can proceed to go direct with the Ombudsman or if they rather have solicitors deal with the paper-work please contact us.

Last week we reported in The Times that confirmed the investigation by the Financial Conduct Authority (FCA) could lead to a shocking mis-sold compensation payout totalling £10bn by the Banks.
A specialist company  Numis considers banks, most notably Lloyds Banking Group, could face a £10 billion compensation bill if the FCA found evidence of “widespread misconduct” where banks were ordered to refund higher repayments. However the  Royal Bank of Canada analysts estimated the figure could be between £2 billion and £8 billion.

The potential misconduct related to car finance loans has raised estimates of a substantial compensation bill for banks, particularly Lloyds Banking Group. The inquiry focuses on whether borrowers, predating January 2021, faced higher interest rates in exchange for increased commissions to car dealers.

Making a claim for mis-sold finance

We can help you every step of the way from submitting a claim against the loan company and thereafter through FOS.  We do charge for this service in the event that we win.  If we do not obtain any money you pay nothing.  However we must advise that FOS undertake their own free scheme so if you are feel  you can claim direct yourself and have the time then you should take up that service.

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