More than one million complaint letters have been sent by angry drivers who overpaid on interest rates when purchasing a vehicle between 2007 and 2021.
This equates to 30,000 complaints a day since February 6 when consumer website MoneySavingExpert.com launches its car finance tool.
The tool highlighted how at least £480million could be owed back to consumers after being ripped off by high interest rates during the 14-year period.
The money saving website found that brokers and car dealers had discreetly pushed the interest rates higher on vehicle purchases and the more they did that, the more commission they received.
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Martin Lewis has suggested that drivers could receive around £1,100 on average
PA
The scheme, which is known as the discretionary commission arrangement (DCA), was rarely publicised to consumers, meaning they were repeatedly paying more than necessary.
The website estimated that around 40 per cent of car finance deals had discretionary commissions, meaning millions overpaid without knowing.
In January 2021, the Financial Conduct Authority banned DCAs, and in January 2024, it launched an investigation to crack down on the impact the schemes had on the public.
In the initial report, the regulator said it believed it was necessary to ban motor finance commission models that incentivise brokers to set customers a higher interest rate to earn more commission.
Breaking the strong link between customer interest rates and broker earnings should decrease financing costs for consumers, the FCA detailed.
Due to the high number of responses, the Financial Ombudsman Service has extended the deadline for dealing with complaints from six to 15 months.
Martin Lewis, founder of MoneySavingExpert.com, claimed the number of complaints submitted is far more than expected.
He said: “It’s not surprising that some firms are struggling to respond to complaints in a decent time. To frustrated complainers, I’d say for now we should be prepared to give companies some wriggle room on timings, but firms need to urgently step up their complaint handling resources.
“And this is just the beginning. Even though we were at the vanguard of PPI and bank charge reclaiming, in terms of numbers of complaints, this feels like it is building up even more quickly.
“In value terms, car finance mis-selling is potentially going to be the second biggest reclaim payout in UK history – possibly over £10billion repaid – which could even provide a fillip to the economy as PPI did.”
Lloyds has already put aside a provision of £450million towards potential costs and payouts for the misgivings, Lewis added.
However, until the FCA reports its findings, nothing is certain which could mean that consumers are left stranded, Lewis warned.
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Drivers could be owed more than £450million in compensation
GETTY
Out of the 40 per cent of car finance deals which had a DCA, drivers were estimated to have overpaid roughly £1,100.
The regulator said at the time it expects its proposed interventions to lead to improved transparency on interest charges and commission which would lead to some consumers being better able to engage with car finance solutions.
In particular, this should facilitate shopping around as well as improved consumer trust and understanding of car finance.