Lewis: Staggering number of complaints
More than a million complaint letters over mis-sold car finance have been sent through consumer help website MoneySavingExpert.com (MSE) in little over a month.
We have been tracking car finance cases as the big new growth area for consumer litigation practices, although MSE founder Martin Lewis has stressed to consumers that they do not need to use lawyers or claims firms.
Law firms are looking to get involved, however, with Pogust Goodhead launching ‘myfinanceclaim.com’ and Bott & Co announcing a “strategic collaboration” with claims management company Claimsline.
MSE launched a car finance hidden commission reclaiming guide and free complaint tool on 6 February, since when 1,080,000 complaint letters have been submitted – or 30,000 a day.
It said a “back-of-the-envelope calculation” valued these at least £480m, as more than a quarter of complaints were from people with multiple agreements.
The Financial Conduct Authority (FCA) announced recently that it was assessing the extent of the problem with hidden and unfair car finance commission practices, with millions of people potentially affected. It is due to set out its conclusions in September.
People who bought cars, vans or motorbikes on personal contract purchase or hire purchase between April 2007 and 28 January 2021 potentially have claims.
Lenders gave brokers and car dealers discretion to push the interest rates higher, and the more they did that, the more commission they would receive.
These were called discretionary commission arrangements and customers were rarely told about them. Around 40% of car finance deals had such arrangements until they were banned in January 2021 and the FCA estimates the average overpayment at about £1,100.
MSE said consumers should complain now because of the risk of being out of time depending on what the FCA says in September.
To date, the two biggest lenders complained about have been Black Horse Finance (which worked with manufacturers including Jaguar, Land Rover and Suzuki) and Volkswagen Financial Services (Audi, Seat and Skoda) – 30% of complaints made through MSE relate to them.
Lloyds Banking Group, which owns Black Horse, has already made provision for £450m in potential costs and payouts.
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.
“And this is just the beginning. Even though we were at the vanguard of PPI and bank charge reclaiming, in terms of numbers of complaints, this feels like it is building up even more quickly.
“In value terms, car finance mis-selling is potentially going to be the second biggest reclaim payout in UK history – possibly over £10bn repaid – which could even provide a fillip to the economy as PPI did.”
His guide for consumers says: “There’s no need to use a claims management firm to complain – it’d take a cut of any money you’re due.”