New Martin Lewis £1,100 car finance refund update hints that payouts may be on the way

Martin Lewis has shared two updates in this week’s MoneySavingExpert.com (MSE.com) newsletter which “indicate a payout may be coming” for more than 1.2 million people who have used an online tool to generate a complaints letter for possible car finance refunds worth around £1,100.

The consumer champion first highlighted last month how millions of people who bought a car, van, campervan or motorbike on finance before January 28, 2021 may be owed thousands of pounds in what he said could become the “UK’s second biggest reclaim after PPI”. He has now said more than 30,000 letters are being generated daily using the MSE.com template letter, even though a compensation decision will not be announced by the Financial Conduct Authority (FCA) until September 25, 2024.

Martin’s first big update that hints that compensation is coming is that Lloyds, owner of Black Horse, has set aside £350m for potential costs and payouts. The other is that the boss of the FCA said last week that “it's improbable its investigation will find no evidence of wrongdoing”.

Martin wrote in the newsletter: “Two updates that indicate a payout may be coming.

“Lloyds, which owns Black Horse, has already put a £450m 'provision' towards potential costs & payouts for this. A strong indication that it thinks it, and by inference others, will probably need to pay back money due to DCA mis-selling.

“The boss of regulator the Financial Conduct Authority (FCA) last week said it's improbable its investigation will find no evidence of wrongdoing. We won't know until it reports in September, but it is another strong indicator.”

Martin also said that the number of people using the free online tool at MSE.com are “beyond anything I expected” and urged people to be patient waiting on a response to their complaint as most firms have no plan in place to deal with the volume.

To help everyone who has already emailed their complaint, Martin and the team of experts have put together a complete next steps list.

This covers:

• What to do if you complained but had no response yet
• What to do if your complaint has been acknowledged, but no more information has been given
• What to do if you’ve had a response with options

The full guide, plus the template letter and an indication on when specific finance firms are likely to respond can be found on MSE.com here.

MSE.com's five car finance commission mis-selling need-to-knows

1. This is for those who bought a car, van, campervan or motorbike on PCP or Higher Purchase deals (not leasing) for primarily personal use between April 2007 and 28 January 2021.
2. Lenders said brokers and car dealers had discretion to push the interest rates higher, and the more they did that, the more commission they’d receive. These were called discretionary commission arrangements (DCAs) and customers were rarely told about them. Around 40% of these car finance deals had DCAs, meaning millions overpaid without knowing. So without checking, people won’t know if it happened to them.
3. In January 2021, the FCA banned DCAs, and in January 2024, it launched a huge mis-selling investigation. The deadline for dealing with complaints has been extended until the FCA reports its findings on 25 September 2024.
4. Martin Lewis believes it is unlikely the FCA would’ve launched such a huge public investigation unless it had strong evidence of systemic mis-selling. Yet he says until the FCA reports its findings, nothing is certain - and as one big risk is that there is a time bar placed on complaints, urges people to log a complaint as soon as possible, to avoid the risk of being timed out.
5. There is no need to use a no-win, no-fee claims firm. With the totally free MSE tool, found here, you just answer a few questions on your car finance agreement (answers aren’t recorded, so as not to inadvertently data-mine) and then the tool builds an email to request information on whether you had a DCA, then logs a complaint.