Millions of drivers could be awarded a significant amount of money if they financed a car in recent years as experts call on motorists to check as soon as possible.
The Financial Conduct Authority (FCA) said it would investigate issues in the car financing sector when looking at whether companies unfairly profited from people buying vehicles.
It follows law changes in 2021 that saw car dealers banned from benefitting from commission models which incentivised dealers to raise costs for customers, prompting a number of complaints.
Firms are accused of failing to give drivers timely information about the law changes, as well as issuing higher costs for people looking to finance a car.
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Experts have suggested that drivers could receive thousands of pounds in compensation
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The FCA announced it would review historical motor finance commission arrangements and sales across several firms as money saving expert Martin Lewis said compensation given out to drivers could be on a similar scale to a PPI-type situation at the top end.
The Finance and Leasing Association (FLA) provided £51billion in car financing in 2022 alone, suggesting that the FCA investigation could lead to millions of vehicle owners being involved.
Pete Ridley, expert at Car Finance Saver, urged drivers to look at their financing deals as millions of drivers could potentially be owed compensation.
He added: “This isn't just a minor discrepancy. We're potentially talking about over a million drivers who've been unfairly treated in their finance deals, with 10,000 already having come forward.
“Given the nature of the Discretionary Commission Agreement (DCA) policy, there is also the slim possibility that some car owners may get their entire loans paid back.
“This is if the FCA deem their brokers have acted unfairly enough - most will likely only get back their loan interest or broker’s commission, but it’s still worth looking into.”
He highlighted how similar cases of financial compensation for car owners could see drivers receive an average of £1,500 for their claims.
Drivers should only apply if they used car finance to buy a car before January 28, 2021, and if their lender and broker had a DCA.
Someone will not be eligible if they bought a car on or after January 28, 2021, or used a car hire agreement like a Personal Contract Hire.
Drivers are being urged to check their agreements sooner rather than later to ensure they can be included in any compensation action if they have been overcharged.
Pete Ridley continued, saying: “If you suspect you've been overcharged, there could be a strong compensation case, so it’s best to get in before a final decision is made by the FCA.
“It's not just about reclaiming what's yours. It’s about holding financial institutions accountable for transparency and fairness.”
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Martin Lewis has suggested that the compensation could be compared to levels seen with the PPI scandal
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The FCA also advises filing a complaint with their loan provider first and taking it to the Financial Ombudsman if that doesn’t work.