One million motorists can receive compensation for defrauding car loans
One million motorists can receive compensation for defrauding car loans
A lawsuit is being filed against three of the country’s largest auto finance companies for incentivizing car dealers to sell expensive finance to used car buyers.
If successful, the action could lead to £1 billion in damages, with around one million people eligible. In the 2010s, lenders gave car dealers the freedom to sell loans to motorcycle buyers at a range of interest rates.
The higher the interest rate a dealer charged a customer to sign, the more commission they received – and the more profit the loan company made on the financing. Such discretionary commission was banned by the Financial Conduct Authority (FCA) in 2021 to ‘protect consumers’.
But now consumer lawyer Doug Taylor, assisted by litigation specialist Scott+Scott, is seeking damages for those borrowers who, when discretionary commission was rife, got more expensive loans than they should have.
The case, filed with the Competition Appeals Tribunal, is an ‘opt-out’ action, meaning all eligible borrowers will automatically be included in the action. The claims are against lenders Black Horse (part of Lloyds), Santander Consumer (UK) and MotoNovo Finance. Together they dominate the car financing market.
Auto Claims: The higher the interest rate a dealer had a customer sign, the more commission they received
Anyone who entered into motor financing agreements with these companies between October 2015 and January 27, 2021, when the FCA ban took effect, is covered by the claim. More details about the claim can be found here.
On Friday, Taylor said the action was based on a “clear case of consumer harm” and was “the easiest way” for consumers to get damages.
MotoNovo, owned by Aldermore bank, said: “We are aware of a legal claim and we are preparing a response.”
Santander said it would not comment on “actual or potential claims against us,” while Lloyds said it is committed to ensuring customers have clear information to make informed decisions about the products they buy.