Loans

BBC Morning Live viewers said instead of £700 they will get £420 payout – and be ‘bombarded with calls and texts’

A BBC expert has given a warning to anyone who bought a car between 6th April 2007 and 1st November 2024. Finance expert Iona Bain told BBC Morning Live viewers that they face losing out by £280 on average if they make the wrong decision.

Ms Bain told hosts Helen Skelton and Rav Wilding that the car finance compensation scheme final details will be released in March – but people could miss out by appointing a claims company.

The Financial Conduct Authority (FCA) is hoping to compensate motorists who were unfairly sold a car loan between 2007 and 2024 because they were not properly informed about the commission paid to brokers, including car dealers.

Under the current proposals, about 14 million car finance deals could be eligible for compensation, with people estimated to get an average of £700 per agreement.

Ms Bain said: “So, if you took out car finance with a vehicle that was bought between 6th April 2007 and 1st November 2024, and if the car finance deal you got was Personal Contract Purchase (PCP), then you could be eligible for a share of this compensation bill, which is £8 billion.

“Essentially, we’re talking about the commission that was paid behind the scenes by car finance lenders to brokers whenever they sold one of these deals. Customers weren’t always aware of the level and scale of this commission, and that meant, in many cases, customers ended up with car finance deals that were more expensive and less competitive than they should have been.

“And that’s certainly what the Supreme Court ultimately ruled, and it decided that compensation was due to all those customers that were potentially in that situation. So look, it’s taken a while to get to this point, but now the Financial Conduct Authority (FCA)—which is Britain’s regulator in this area—it’s said it’s going to be publishing the system for how people can apply for compensation in the next month or so.”

She said that the system being created will be straightforward and most importantly free to use. She said: “You can make a claim yourself; you don’t have to rely on a third party like a claims company. It should be completely straightforward for you to do yourself.”

She warned about claims management companies bombarding people – and explained they are making unfair claims and then will take large fees. She said: “If you see these adverts online, they are very enticing. They make claims like, “We’ll handle your claim for you,” “No win, no fee,” or “You could get thousands. But this is the reality: if you use one of these claims companies—whilst it’s perfectly legal to do so—they can take 20% to 40% of your compensation.”

Someone getting a payout of £700 would end up paying £280 to the company. Ms Bain added: “It is a lot. It means you won’t keep all the money that you’re ultimately owed. The fees can be buried in the small print, and you may not be aware of them until you’ve signed on the dotted line.

“So, one example is: let’s say you’ve signed up for a claims company, but then you change your mind—and that’s your right to do so. Some of these claims companies are charging termination fees for the work that’s been done, and those termination fees can be spurious and disproportionate for the work that’s actually been done.”

She said one prominent advert claimed the average car finance compensation that’s being paid out is going to be over £1,800. Ms Bain added: “I’m just going to say it: that’s not true. It’s not true, and the reason for that is that the FCA has not confirmed what compensation people are going to be getting. So, it has said that the average amount that will be paid out will be £700. Some people will get more, some people will get less, but it’s impossible to say at this stage what individuals will be getting until we know more about that FCA process.

“And also, I’m hearing these reports of people seeing these adverts, then giving their contact details to these claims companies, and then being bombarded by texts and calls trying to persuade them to sign up. I personally think that’s unacceptable.”

Other things to watch out for are:

• Upfront fees
• Unexplained charges
• A company promising guaranteed payouts or huge sums of money.

Ms Bain explained: “These are all big red flags. Just a reminder: you don’t need to use one of these companies. You can do this yourself and you get to keep all the compensation.”

Morning Live has provided a template for this on their website here.