Scammers making fake car finance compensation offers

Consumers are being warned about scammers posing as car finance lenders.

Earlier this month, the Financial Conduct Authority (FCA) confirmed it’s to open a compensation scheme for people affected by the car finance scandal.

But since making this announcement, the watchdog has had reports of scammers calling people, claiming they’re owed compensation and asking them for their personal information to proceed with a claim.

The FCA is stressing that any call of this nature is fraudulent, as no compensation scheme has yet been set up and lenders aren’t yet contacting customers about compensation.

Anyone who gets a call like this has been advised to hang up straight away and not to share any personal information.

What is the car finance scandal?

In January 2024, the Financial Conduct Authority (FCA) started investigating discretionary commission arrangements (DCAs) on car loans issued between 2007 and 2021. 

DCAs helped banks and lenders providing car finance to allow dealers to set their own interest rates on repayment plans.  

This meant car dealers could undercut the bank or lenders’ preferred rate to secure a sale, or charge more so that they could earn higher commission. 

The Supreme Court recently ruled that including hidden commission arrangements in car finance loans wasn’t automatically unlawful.

But it also ruled that in certain cases, the failure to properly disclose commission arrangements could be unfair and unlawful, which leaves the door open for some people to claim compensation.

When will a compensation scheme be up and running?

The FCA will begin consulting on what a compensation scheme will look at in early October.

If it goes ahead, the first payouts should be made next year.

Anyone who has already complained doesn’t need to do anything.

If you’re worried that you weren’t told about commission and think you’ve paid too much, you should complain.

The FCA has urged people not to use a claims management company or law firm, as this could cost you around 30% of any compensation paid.