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Millions of UK drivers could be entitled to compensation following a major consultation launched by the Financial Conduct Authority (FCA) regarding car finance deals. Money saving expert Martin Lewis has been explaining the implications of this consultation, estimating that as many as 14 million motorists may be due a share of a potential compensation pot.

Lewis, in a video shared on X (formerly Twitter), highlighted a specific issue known as “discretionary commission arrangements.” This practice, which occurred between 2010 and 2020, involved car dealerships and brokers adding extra charges to car loans without explicitly informing customers. These hidden charges were designed to boost the dealership's commission, effectively increasing the interest rate paid by the borrower.

What Exactly Were Discretionary Commission Arrangements?

Simply put, discretionary commission arrangements meant that a dealer could increase the interest rate on your car finance agreement without your knowledge or consent. They would then pocket the extra commission generated. This practice was deemed unfair by the FCA, and the consultation aims to determine how best to compensate those affected.

Who is Affected?

The FCA’s consultation is looking at agreements where a dealer received a commission based on the interest rate charged to the customer. If you took out a car finance agreement between 2010 and 2020 and suspect you were charged a higher interest rate than you should have been, you might be eligible for compensation. It's important to note that not everyone will be due compensation, and the amount will vary depending on the specifics of each case.

How Much Compensation Could You Receive?

While it’s difficult to give precise figures at this stage, Lewis suggested that potential payouts could be substantial. The total compensation pot could reach billions of pounds. The FCA is currently reviewing data and assessing the scale of the issue, which will inform the compensation process.

What Should You Do Now?

• Don't Rush: The FCA consultation is ongoing. There's no need to rush into making a claim immediately.
• Gather Your Documents: If you have car finance agreements from between 2010 and 2020, keep them safe. You may need them later.
• Stay Informed: Keep an eye on updates from the FCA and reputable financial advice websites like MoneySavingExpert.com.
• Be Wary of Scams: Be cautious of companies offering to claim compensation on your behalf for an upfront fee. The FCA is expected to provide a clear process for claiming, and you shouldn't need to pay anyone to do it for you.

The FCA Consultation: What Happens Next?

The FCA is actively seeking input from consumers, lenders, and other stakeholders. The consultation period is open, and the FCA will use the feedback received to shape the final compensation scheme. They are expected to announce details of the claims process in the coming months.

This is a significant development for millions of UK drivers. By understanding the issue and staying informed, you can ensure you don't miss out on potential compensation if you were affected by discretionary commission arrangements.