Over a quarter of a million UK policyholders have complained that they were overcharged for motor loans due to the now-banned activity discretionary commission arrangements before 2021.
This was the number of complaints filed in just one day after MoneySavingExpert’s Martin Lewis opened a portal for affected customers.
In 2021, the Financial Conduct Authority (FCA) banned commission models that gave motor finance brokers and dealers an incentive to raise policyholders’ finance costs.
But insurance firms have repeatedly rejected claims from policyholders that they were overcharged because of these commissions on the basis that they “have not acted unfairly nor caused their customers loss based on the applicable legal and regulatory requirements”.
In response, the FCA has opened an investigation into these overcharging claims.
An estimated 40% of motor policies taken out before 2021 are believed to have included hidden fees of £1,100 on average.
Lewis called the results “staggering” in a Twitter/X post. He also predicted £115 million worth of payouts arising from potential claims, though even that sum is conservative.
Car finance reclaiming update. Staggeringly after just 1 full day of our free complaint tool being live...
262,500 complaint emails have been sent
It's estimated 40% will've had hidden commission
Typical overcharge was £1,100 per agreement
So predicted payout'll be £115,000,000…
— Martin Lewis (@MartinSLewis) February 8, 2024
“These numbers are off the charts - far bigger even than the closing days of the PPI deadline,” he added.
Lewis continued his rallying cry on ITV’s Good Morning Britain this Thursday: “I’ve never seen anything like it, even the final days of PPI weren’t like this.
“If you had a car, a van, a motorbike a campervan on finance, before January 28 2021, you may have been mis-sold and you will not know now.”
In one example of a successful claim, a Blackhorse insurance borrower bought a £7,619 car with a 100% loan and paid 5.5% interest (£2,096 over five years), when the cheapest rate available was 2.49%.
The Ombudsman ordered Blackhorse to repay the £1,147 difference in commission, plus interest.
Given the 262,500 complaints filed through MoneySavingExpert in just one day, there will undoubtedly be more repayment down the line.