HUGE car finance update signals ALL mis-sold commission complaints could come under probe – Martin Lewis explains what's happening

HUGE CAR FINANCE NEWS: Now most people who've had any type of it are being urged to complain – doubling the numbers.

Minutes ago, the regulator, the Financial Conduct Authority (FCA), announced it's consulting for two weeks (so quick, it's a likely done deal) on extending the time firms have to handle motor finance commission complaints. This is on the back of a Court of Appeal ruling a couple of weeks ago and the extension is to incorporate a potential Supreme Court decision.

- The key bit: While not specified in its announcement, I've had it confirmed this applies to ALL car finance commission complaints, not just the Discretionary Commission Arrangements (DCAs) complaints previously covered.

- What this means: It signals that the FCA is paving the ground to, in future, broaden the scope of its car finance investigation, so not only does it look at the 40% of past claims that had DCAs (where dealers could increase their commission by increasing interest) but all commissions including fixed commissions.

This is on the back of the Court of Appeal ruling 'consumers need to know all material facts including the amount of commission', which they often weren't told even in fixed commission cases.

It looks like (I need to dig) if the hold is extended, almost everyone who has had car finance deals may have a complaint (I need to examine timelines of what counts) and be potentially due money back (this includes those already rejected as they were told they 'didn't have a DCA').

This potentially more than doubles the number of people involved, and would really start to look more like PPI scale of payouts (and a substantial threat to the car finance industry).

- What should people do: The FCA will suggest people log their complaints sooner, including fixed commission complaints, in order to avoid missing out due to a potential time bar. I will work with my MSE team to expand our MoneySavingExpert free complaints tool (that's already had 2.5 million complaints through it) to help the new cohort of people who may be able to complain.

- What will the outcome be: I think this makes it more likely that DCA commission cases will get future payouts. For 'fixed' commissions, this isn't about the FCA, it all strongly swings on if the Supreme Court upholds the Court of Appeal ruling (assuming it accepts the appeal to it, which the FCA has urged it to do, and to do at speed). That's the key to if the FCA will broaden its scope.

These are provisional first thoughts, bashed out at speed. Obviously there's more work to do, but it is big.

Car finance & potential commission reclaims: is it fair, is it dangerous?

Until the last couple of weeks we were only talking about possible refunds where people had hidden Discretionary Commission Arrangements (DCAs), which meant dealers could up interest to get paid more commission without consumers knowing. In this area, you can see the argument of lack of transparency and restriction of consumer choice.

Then a fortnight ago, the Court of Appeal ruling came and said 'consumers need to know all material facts including the amount of commission', which opens the door to possible reclaims for all car finance commission and indeed could read across to other lending areas (though it will all depend on if the Supreme Court backs up that view on appeal) and today the FCA said people should log complaints on that too in case of a future time bar (see my earlier post).

When mulling this, I find it more difficult to see the unfairness and that redress is due on car finance firms with fixed commission that were following regulator's guidelines. And even then, if it is thought that redress must be due, the test surely must be something like, was it hidden that there was commission and, most importantly, was the commission charged excessive?

If not, and we move to a model of car finance reclaims of 'any commission if amount wasn't known' was unfair and should all be repaid, it's a push even for me, and may risk being counterproductive to consumers as it is a potentially existential threat to the consumer lending and could both mean less availability and higher costs in future.