Millions who bought cars on finance could get payout as major mis-selling investigation launched

If compensation is awarded to those affected, it is thought this could be as big as the mis-selling of PPI, as ITV News' George Hancorn explains

Millions could be due a huge payout after a major investigation was launched into the mis-selling of cars and vans on finance.

More than a quarter of a million complaint emails have been sent after just one day of a free motor finance reclaim tool launched by consumer champion Martin Lewis going live.

It follows the Financial Conduct Authority (FCA), the UK's financial watchdog, investigation into claims some consumers had been unfairly charged inflated prices on new and second hand cars bought on finance.

But how do you know if you've been affected?

Before January 2021, some lenders allowed brokers (the person arranging the loan, for example, a car dealer) to adjust the interest rates they offered customers for car finance.

Typically, the higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement.

Discretionary commission arrangements created an incentive for brokers to increase how much people were charged for their car loan – and the FCA banned this practice in 2021.

The regulator has said there have been a high number of complaints about how much customers were charged before the ban.

Most of which have been rejected by providers, spurring the investigation.

If compensation is paid out, it's thought this could be as big as the mis-selling of PPI.

If you took out a plan on a car or a van before 2021, it's likely you could qualify for a payout.

Money Saving Expert's Martin Lewis has since issued advice for those who could be impacted, calling on them to make a complaint.

Writing on X, formerly Twitter, Mr Lewis said: “Car finance reclaiming update. Staggeringly after just 1 full day of our free complaint tool being live… 262,500 complaint emails have been sent.”

Mr Lewis added in a further post: “These numbers are off the charts – far bigger even than the closing days of the PPI (payment protection insurance) deadline.”

The free tool and guide are on the website, which was founded by Mr Lewis.

The investigation could bring two outcomes.

Either those who've already complained could receive a payout, or a bigger outcome would see full payouts to all those who qualify.

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If you think that applies to you, it's best to put a complaint in to the firm who sold you the finance.

Though it could be a while until you hear back as complaints lodged between November 17, 2023, to September 25, 2024, won't be responded to while the FCA investigates the matter.

And how much could you get?

It is not yet known but the FCA said it's working out how those who are owed compensation could receive an appropriate settlement.

The FCA has further information about the issue for consumers on its website.