- The money expert fears the issue is building up faster than the PPI scandal
Martin Lewis has said that motorists could be entitled to one of the biggest payouts in UK history as more than one million complaints have been submitted over car finance.
Millions of customers have raised concerns that they may have been overcharged on the car finance according to MoneySavingExpert.com.
Consumer champion Martin Lewis said car finance mis-selling has the potential to be the ‘second biggest reclaim payout in UK history’ after the PPI scandal.
About 1.1million complaint emails have been sent out through a free tool on the MoneySavingExpert.com website, which was founded by Mr Lewis, amounting to about 30,000 per day.
The tool and guide were launched on February 6 in response to the UK’s financial regulator opening a major probe into hidden and unfair selling practices in the car finance market.
Before being banned in January 2021, some lenders allowed brokers to adjust the interest rates they offered customers for a loan, which could mean they received more cash in commission.
Research found that the selling practice, known as a discretionary commission arrangement, led to higher finance costs and was unfair to consumers.
Black Horse is currently the most complained-about lender via MoneySavingExpert’s car finance tool, with about 16% of the total number.
Owned by Lloyds Banking Group, the dealer offer loans on cars including Jaguar, Land Rover and Suzuki.
Lloyds last month said it was setting aside about £450million to cover potential costs and compensation relating to claims.
Volkswagen Financial Services is the second most complained-about lender, followed by Stellantis Financial Services and Santander, according to the consumer platform.
Mr Lewis said: ‘The numbers of complaints in not much more than a month is staggering – off the charts – far more than I expected.
‘So, it’s not surprising that some firms are struggling to respond to complaints in a decent time.
‘To frustrated complainers, I’d say for now we should be prepared to give companies some wriggle room on timings, but firms need to urgently step up their complaint-handling resources.’
The money expert said the number of complaints about car finance suggest it could be a bigger problem than the PPI mis-selling scandal which rocked UK lenders in previous years, based on the number of complaints.
He said the issue ‘feels like it is building up even more quickly’ than the scandal which saw banks and companies paying out millions in compensation.
Lloyds had to pay billions of pounds to compensate customers who were mis-sold payment protection insurance from the mid-1990s.
‘In value terms, car finance mis-selling is potentially going to be the second biggest reclaim payout in UK history – possibly over £10billion repaid – which could even provide a fillip to the economy as PPI did,’ Mr Lewis said.
Meanwhile, the Financial Conduct Authority (FCA) said it wants to make sure customers are given compensation in an orderly and efficient way, if it finds they have lost out due to widespread misconduct.
This could mean setting up a formal redress scheme. The watchdog is due to set out its next steps by the end of September.
The MoneySavingExpert.com tool helps people build an email and submit it to their car finance provider, if they think they are likely to be affected.
Mr Lewis said if people think they could be eligible then they should consider logging a complaint ‘sooner than later’.
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