Millions of drivers could be owed compensation for a major car finance scandal as new rulings move one step closer to offering motorists a crucial lifeline.
The car finance scandal could have impacted roughly 23 million drivers over 14 years, with drivers hoping that the upcoming Supreme Court ruling will offer much-needed justice.
The issue saw motorists overpay when purchasing car loans between 2007 and 2021 through Discretionary Commission Agreements, with a whopping £300million estimated to have been spent by drivers.
The practice has since been banned by the Financial Conduct Authority, which has been working on whether to introduce a compensation scheme for impacted motorists.
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Last year, the FCA launched a complaint process that allowed motorists to complain to finance lenders who may have overcharged them on DCA arrangements.
On top of the formal process, a recent High Court ruling added more fuel to the fire, ruling in favour of the Financial Ombudsman Service, which detailed how drivers should have been made aware of the DCA arrangements.
New polling has revealed that 45 per cent of UK adults believe they are likely to be eligible for compensation over motor finance deals taken between 2007 and 2021.
Alex Neill, co-founder of Consumer Voice, said: "People are rightly concerned about the use of secret commissions in car finance. Millions of drivers feel misled and have suffered financial harm - so it's no surprise that public expectations for compensation are high."
The car finance scandal has impacted roughly 23 million drivers
GETTYHowever, while experts have estimated 23 million people are owed compensation, this figure could be much higher as over half (52 per cent) of people recorded taking out car finance loans before the 2021 ban "still don’t know whether their dealer received commission from their lender".
Neill added: "Our own research shows that two-thirds of consumers would have acted differently if they had known about dealer commissions, and many remain concerned about how those commissions impact what they pay."
Elizabeth Comley, chief operating officer at Slater and Gordon, explained that the public "rightly expects to be compensated for losses".
"While the FCA is trying to put things right, there’s a risk that a redress scheme will leave many people disappointed and keen to challenge the process," she added.
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However, the FCA has explained that it will wait for the Supreme Court ruling on the finance scandal before setting up a redress scheme, which would create payments back to drivers.
The ruling follows the challenge by lenders Close Brothers and MotoNovo Finance, which disputed the claim that DCA agreements were deemed unlawful without obtaining the customer’s fully informed consent.
The Supreme Court is expected to make its ruling this month, allowing the FCA to move forward with a potential redress scheme.
Ahead of the rulings, major car finance lenders have already started setting aside funds in anticipation of potential payouts. Lloyds Banking Group allocated £1.2billion to cover potential compensation related to car finance mis-selling.
The Supreme Court is expected to deliver a verdict on the car finance scandal
PAComley added that the best way to ensure a redress scheme works well for everyone is to "allow people the choice to hire a lawyer to support their claim".
She added: "Independent professional lawyers work to assemble documents and evidence, pursue people’s rights and ensure they get what’s due to them."
The Consumer Voice organisation has urged drivers who think they overpaid on car finance commissions to come forward and contact their lenders before the December cutoff date.
"Don’t be left in the dark if you suspect you were not informed about the commission fee - and, as a result, may not have got the best deal possible on your car finance," it said.
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