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Martin: 'Did you use finance from Apr 07 to Nov 24 to buy a car, motorbike or camper van?'

New. Our updated free Car Finance Complaint Tool now includes all 3 ways you may've been mis-sold. Are you one of 14m due a typical £700?

A month ago, the financial regulator, the FCA, announced a consultation for the biggest consumer redress scheme since PPI, with a predicted £8.2 BILLION to be paid out.

Within that, the definition of mis-selling was expanded. So I asked you then to hold for a few weeks while we updated our tool with the new rules, and to cover the wider group of firms now impacted. Thank you for waiting. Now we're ready - the updated complaint tool has just gone live, so let me take you through who can claim? and what needs doing now (even if you complained before)?

This consultation is (hopefully) the final stage. While it's called a 'consultation', this is the regulator setting out its plans. Its focus is a simple-for-consumers redress scheme, where firms must proactively reach out to those mis-sold - to reach the max number of people. Barring legal challenge (there is some talk that firms are trying to make it difficult), my guess is there'll be few major changes. The plan is for the scheme to launch in early 2026.

This regulator's scheme is only one option. There's also the option of going to court, where if you win, you may be awarded more (though 30%+ would likely go on claims firms'/lawyers' fees, which could change the maths). This is because it's likely the regulator has compromised somewhat to pre-empt the car finance industry doing a Judicial Review (if they did, I'd probably end up pushing people to court, which'd cost the industry far more on a case-by-case basis).

Yet I've made the call to focus my and MSE's resources on supporting you through the FCA redress scheme... based on my past experience of major reclaim campaigns, the fact that court scares off many people, and as the huge majority of people contacting me say: "Can't they just make it easy and quick?" rather than how they can push it to the max. Crucially, too, the proactive nature of the scheme likely means millions more will get redress.

So, all the info below refers to that - and is based on our best estimate of what we know so far, though please remember nothing is 100% set in stone yet.

The 'am I likely impacted?' checklist. Those criteria to be covered by the regulator's scheme are..

• Motor vehicle finance: Car, van, motorbike & camper van (not caravans, though, as this is only about motor finance).
• Eligible dates: Finance from 6 Apr 07 to 1 Nov 24. (It was to 28 Jan 2021, but now that the mis-selling criteria have been expanded, later dates are possible.)
• Finance types: Personal Contract Purchases (PCP) & Hire Purchase (HP). Leased cars are NOT included in this scheme.
• Vehicles for personal use. (Or sole trader or small partnerships for work, but then the finance must be under £25,000.)
• It applies even if owner passed away: The executor / beneficiary can claim. See help claiming for deceased relative's estate.
• It applies if vehicle is paid off: Or you no longer own it.
• You may've had multiple eligible car finance deals: Each finance agreement is separate, so if you had multiple deals, you may be due multiple payouts.

So as long as you didn't fall foul of any of those criteria, you may want to join the 3.3m complaints already made via our tool.

Under the redress scheme, there are now THREE ways you may have been mis-sold. You may've been mis-sold in more than one way, which is why the totals below add up to more than 14m agreements. With all of them, the key is that what was happening wasn't disclosed to you (it only was in a few % of cases), so...

There's no way to know now if you were mis-sold without complaining. The whole point is they didn't tell you what they were doing!

1. Discretionary Commission Arrangements (DCAs). 11.4m agreements. This has been our focus for two years, so if you've already complained, it was likely about this. Here, the interest rate was increased in order to pay the dealer or broker extra commission. DCAs were banned on 28 Jan 2021, so this only applies to finance agreements prior to that.
   
   
2. New. Contractual ties. 3.2m agreements. This is where a broker didn't adequately disclose it was working exclusively with one lender, or that one lender had a right of first refusal, eg, the dealer said: "We'll go to a panel of lenders to find you the best car finance," but, in reality, one lender had first refusal, so the 'searching the market' bit was false.
   
   
3. New. Unfairly high commission. 2.9m agreements. If the commission paid to brokers or dealers was BOTH over 35% of the total cost of credit AND 10% of the loan, then without disclosure, this is seen as likely excessive and thus mis-selling.

What you do now depends on whether you've complained yet or not, and if you did complain, how you did it. And remember, if you had multiple agreements, treat each separately (though when complaining, if you had multiple with the same firm, you can do that complaint in one).

Not complained yet? You needn't do owt yet, but I'd suggest you do use our FREE tool... Under the current plans, firms will have to identify and contact all the people who were mis-sold that they can, and ask if they want to OPT IN. That's quite something, but there is still a risk those who had older agreements, have moved house, or got married / changed name may miss out.

So, my view is it's safer to put a complaint in (the FCA boss agreed when we spoke) via our free tool. Then you should be part of the group for whom it's all done automatically and at greater speed - as once you've complained, if you were mis-sold, they must contact you to say it's being processed and give you a right to OPT OUT (so you needn't do anything more if you're happy).

Already complained using the free MSE tool (or any DIY route)? Over 3m complaints were sent via the prior incarnation of our tool, which solely focused on DCAs. What to do now depends on how (& if) the firm replied.

• If it said you DID have a DCA: compensation is very likely. So sit tight and wait until the redress scheme hopefully launches in early 2026. Then the firm should write to you saying if you're due a payout (it will also have to see if you were mis-sold in the other ways, too, though that won't usually impact what you get back).
  
  Crucially, you won't need to do anything. The payout should happen automatically (though it may ask you how you want it paid) unless your details have changed, or in what I guess would be the relatively unlikely event that you want to opt out of the scheme (eg, if you wanted to go down the court route instead).
  
  
• If it said you DIDN'T have a DCA (or didn't say anything). The regulator says even if you only complained about DCAs, the lenders must investigate ALL THREE mis-selling types for that agreement. Your claim is logged, so that should happen. Yet if you were mis-sold not due to a DCA but one of the other reasons, then frustratingly it hasn't been decided yet whether you will be in the opt-in or opt-out system.
  
  This isn't a big deal, as the lender now definitely has your correct contact info (unless it's changed since you first complained). Although as the opt-out system is likely quicker than opt-in, you may choose to resubmit a complaint using our updated tool that includes all three mis-selling categories to ensure you're in it. 

  

I've signed up to a claims firm - what do I do?

The redress scheme is designed to make it easy to get your compensation without the need for paid help, such as from a Claims Management Company (CMC), because the car finance firms have to be proactive in contacting you if they think you're due money back.

Both the financial regulator and the Solicitors Regulation Authority (which regulate some claims firms) have come out to warn about claims firm practices, and they're both cracking down on misleading CMC adverts - with action having been taken on 740 of them in the last couple of years.

If I've got a CMC deal and don't want it, can I cancel? 

I suspect there may be more developments on this as the regulator looks into it more (and it's on our list to do more research on, too). Yet as provisional thoughts, this will often depend on the cost of cancelling versus the cost of staying. This is not an exact science though...

1. If you've only just signed up for a claims firm, almost all of them give you the right to cancel within 14 days, so check that.
2. Read how much am I likely to get below, to see roughly what your payout may likely be.
3. Check your CMC contract to find out what percentage of the amount you get, they will charge. Usually it is 30% + VAT.
4. Check your CMC contract to see if there's a cancellation fee. There usually is. Unfortunately, it's sometimes quite tough to know how much it is (it may be based on a charge for 'work done'), so you may need to contact it to ask. Also check when it's payable, on cancellation (ie, immediately) or on payout, and factor this in to what you do.

When you know all that, you're ready to make a decision - comparing the cancellation cost to the maximum cost of staying. I do worry the sums won't add up well for cancelling at the moment (do feed back how it stacks up for you), but the regulators do say you should only be charged a reasonable amount for work done.

They note most CMCs charge £60 to £80 per hour, so if yours is a lot more, you may want to question it (the FCA says one firm has halved its rate after it raised concerns, and another has capped its exit fees). We aim to do more work on this area.

How much will you likely be paid out? The FCA estimates that under the redress scheme, people will get back 2/3rds or more of the commission paid, an average £700 (my guess is it's using that figure as a claims firm typically takes 30% of the cost, so it's making a point that this is just like all the commission minus claims firm costs).

The calculation's the same whichever way you were mis-sold, even if you were mis-sold in more than one way (with the exception of a few thousand extremely high commission cases who'll get more). To get technical - so do skip this if it confuses you - the regulator will usually take the mean AVERAGE (ie, add these two up and then half the total) of...

• The reduction if your APR was 17% lower (deemed the typical market distortion).
• And the total commission paid to the dealer or the broker.

Now this is NOT easy to know in each case, but as so many people have asked for an estimate of what they'll get, we've tried to come up with something, but it involves a lot of GUESS WORK, as there are huge variables. So see it as, we hope, a 'scale of magnitude', not a reliable answer. There's a difference depending on the type of case, as APRs were higher with DCAs.

PS: See my why car finance compensation figures are lower than many expected blog, if you're thinking that.

Interest will also be added, but not much (not enough in my view).

On top of that, you'll get interest of the Bank of England base rate + 1% (not compounded), over the time you were owed, added to the payout.

This is one area where you may get a significantly better deal if you went to court - which ordered 'commercial rates' to be paid. This is bad for individuals and for the redress scheme, so I think the FCA should increase the rate, or at the very minimum, compound the interest. We have strongly put that in our consultation response.

Though if you had extra costs due to the mis-selling (eg, you took out other debt or got into financial difficulty due to the car finance), you may later be able to argue for more interest. So keep hold of any bank statements or other documents that prove this.

PS: The interest element (not the payout itself, just the interest) will be taxable, but we don't yet know if it'll be paid net or gross. We'll provide more help on that nearer the time.

When will this all happen? This is all still out for consultation, which is due to close soon, though firms are threatening that they haven't had long enough to reply. I suspect they may end up getting a little extra time, which I don't see as a problem if it makes the process smoother - but, crucially, that mustn't delay the implementation of the scheme.

The scheme is currently due to start in 'early 2026', which I take to read as probably Feb or Mar next year. The timings are roughly thought to be as follows (& I know many will be frustrated by this, as it's dragged on and on from the start due to legal challenge), but none of this is close to iron-clad yet.

Opt-out scheme (those who've complained)
- You should be contacted within 3mths of the scheme's start.
- You should be told the redress amount within 7mths of scheme's start.
- You should have the money within 9mths of scheme's start.

Opt-in scheme (those contacted without complaining)
- You should be contacted within 6mths of the scheme's start.
- You should be told the redress and paid within 17mths of the scheme's start.

I do have serious concerns, especially with the opt-in scheme, about scammers taking advantage to use it to try to data mine. We're making suggestions to the regulator to try and pre-empt this, eg, I want to see different envelope colours for the two types and an easy route to contact firms if you're sceptical the correspondence is legit, without using the info on the correspondence (eg, a three-digit number to call for all finance firms, similar to the banks' 1-5-9 number).

PS: The FCA boss is on my ITV1 show tonight (Tue 8pm). I may get a few more answers then, which will go into the updated car finance mis-selling guide if we do. Do remember too this is a moving situation.