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The FCA look into Mis Sold Car Finance in the UK
By Rufus
In March 2019, the Financial Conduct Authority (FCA) released a document publishing their final findings on motor finance, specifically PCP car loans. They were aiming to answer these 4 questions:
- Are firms ensuring that they lend responsibly and making sure that customers can afford their products
- Are there conflicts of interest arising from commission arrangements?
- Are firms providing clear and transparent information about the risks involved to their customers?
- Are firms managing the risk of asset depreciation and are they adequately pricing this risk?
The answers that they found to these questions were shocking. The FCA analysed ~60% of the market and they found that the firms which offer PCP are potentially costing customers over 300 million pounds annually. They found this was due to the fact that the lenders have complete discretion to set interest rates which, the FCA has found, shows that “Lenders are not doing enough to monitor and reduce the risk of harm”. In other words, lenders are setting prices incredibly high and laughing all the way to the bank at the expense of the customer.
The FCA has also found that there is very little correlation between credit scores and the interest rates that customers are offered. This means that even if you have a great credit score and have always paid debts on time you will still be charged extortionate interest rates on your PCP car loan over the 4-year period.
The most insidious aspect of all of this is the fact that all this commission and interest which is being charged on this loan is entirely secret. The FCA claims that their “mystery shopping results raised a number of concerns in relation to pre-contractual disclosure and explanations, and we are not satisfied that firms are complying with… requirements”. They also then said “When disclosures were given, [they] were not complete, clear or easy to understand”
The FCA’s findings confirm the suspicion that lenders are looking to charge extortionate rates of interest in order to line their own pockets. These extortionate commissions, however, may entitle you to file a mis-sale and receive back all the money that was taken from you by these lenders.
If You feel you was mis sold car finance contact us today
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Mis Sold Car Finance Explained
Example 1
- A PCP car on a finance deal was not the best option, it would of worked out 40% cheaper if the customer had used a higher purchase agreement.
- The customer felt that they were pushed into making the wrong decision without complete understanding.
Mis Sold Car Finance PCP Agreement