Surely, you have followed the car finance scandal that affected millions of drivers in the UK over the last few years. But if you think this problem only involves low-value cars sold abroad, think again. The scandal affected various types of vehicles in several parts of the world, and luxury cars are not immune to the unethical practices of sellers and lenders.
How Have People Been Mis-sold?
Car finance companies and dealerships mis-sold car finance products through “hidden discretionary commission arrangements,” which were often embedded within the agreements without the buyers’ knowledge. These arrangements led to inflated monthly payments for consumers.
Consumers were also not informed of the relationships between brokers and lenders. Essentially, brokers were incentivized to set higher interest rates due to commissions paid by lenders, without explicit disclosure to the consumers. This led to conflicts of interest that were not transparently managed.
It’s important to be aware that mis-selling in finance agreements can occur anywhere consumers are offered financial products, often due to a lack of transparency or understanding of the terms being agreed upon. Consumers might not be fully informed about the terms and conditions of a financial product, including the costs, risks, and features; and financial institutions or their agents might use deceptive practices to sell products that are unsuitable for the consumer’s needs but beneficial to the provider in terms of commissions or fees.
Moreover, during vehicle acquisitions, sellers can apply high-pressure sales tactics, inducing consumers to make decisions without having time to think about the consequences of the purchase or to adequately research what is being offered.
Furthermore, contracts for financial products can be complex and may include hidden fees or clauses that are not properly explained, leading to unexpected costs.
In response to the rising number of complaints and the potential widespread impact, major banks and financial institutions have begun to set aside significant provisions for potential compensation payouts. For instance, in the UK, Lloyds Banking Group and Close Brothers Group have allocated hundreds of millions of pounds in anticipation of the costs associated with addressing these disputes.
What To Do?
There are several steps you can take to address the issue and seek redress.
Start by thoroughly reviewing your contract. Look for any terms that were not explained or differ from what was discussed. Compile any relevant communications, such as emails or brochures, that were used to sell you the financing.
The next step is to raise the issue directly with the company that sold you the car. Make a formal complaint detailing how you believe you were mis-sold and what you would like them to do about it. Most companies have a complaints procedure, which should be followed.
If your complaint is not resolved satisfactorily by the company, or if they do not respond, you can escalate it to your country’s financial regulator. They usually offer a free, independent service to resolve disputes between consumers and lenders. They can order the corporation to make compensation payments if they find in your favor.
When the amount involved is significant or the case is complex, consulting a solicitor who specializes in mis-sold car finance claims may be advisable. They can offer guidance on your legal rights and options, ensuring you are fully informed and appropriately represented.
You might still be able to claim compensation through a financial services compensation scheme even if a lender has gone out of business.
Where to Ask For Help?
Similar to the Financial Ombudsman Service in the UK, which investigates brokers and lenders potentially involved in car finance scandals, other countries have ombudspersons specific to the financial sector. In the United States, the Consumer Financial Protection Bureau (CFPB) offers tools to lodge complaints against financial companies, which are then investigated. Canada has the Financial Consumer Agency of Canada (FCAC), and also specific services like the Ombudsman for Banking Services and Investments (OBSI). The Australian Financial Complaints Authority (AFCA) provides a similar service, offering free, fair, and independent help.
Using these bodies can provide a structured, authoritative path to resolving disputes without the need for legal action. However, dealing with them may be time-consuming and even frustrating. In these cases, seeking the help of a solicitor might be a better idea, as they will handle the entire case for their clients, from submitting the complaint to managing communication and paperwork.