Up to Seven Million Britons Targeted in Car Loan Mis-Selling Debacle, Banks Facing £13 Billion Bill, Sparks Comparisons to ‘PPI on Wheels’

Up to Seven Million Britons Targeted in Car Loan Mis-Selling Debacle, Banks Facing £13 Billion Bill, Sparks Comparisons to ‘PPI on Wheels’

A brewing scandal reminiscent of the infamous PPI mis-selling debacle has emerged, with up to seven million individuals potentially entitled to compensation worth thousands of pounds after being systematically mis-sold expensive car loans by dealerships since 2014.

Echoes of ‘PPI on Wheels’

Dubbed ‘PPI on wheels’ by some experts, this scandal mirrors the payment protection insurance meltdown of the late 1990s and early 2000s, potentially leaving banks with a staggering £13 billion bill.

The sheer scale of this revelation raises serious questions about the banking industry’s treatment of customers and highlights regulatory shortcomings.

The Nature of the Mis-Selling

The focus of this mis-selling scandal revolves around individuals who purchased new cars using loan finance, particularly through personal contract purchase (PCP) plans or hire purchase (HP) agreements.

These financing arrangements, utilized by around nine in ten new car buyers, were often accompanied by ‘discretionary commission arrangements’ (DCAs), where dealerships earned substantial commissions from banks, resulting in inflated interest rates for consumers.

Implications and Financial Detriment

For consumers, the consequences were dire, with some unknowingly paying significantly more in loan interest than necessary.

The Financial Conduct Authority (FCA) estimates that car buyers could have paid up to £1,100 more than they should have due to commission payments.

Investment bank Jefferies predicts the total cost of rectifying this financial detriment to be a staggering £13 billion.

Response and Redress Scheme

In response to mounting complaints, the FCA has initiated a probe into DCA mis-selling, with findings expected in September. Lenders like Lloyds Banking Group have already set aside hundreds of millions to address potential claims.

While the exact mechanism for compensation remains uncertain, experts anticipate the establishment of a redress scheme to facilitate claims.

Guidance for Affected Consumers

Consumer advocates advise affected individuals to contact their dealership to ascertain whether their loan involved a DCA. Websites offer templates for requesting information, ensuring transparency from dealerships.

Martin Lewis advises consumers to seek clarification from their dealership and await further details from the FCA regarding potential compensation.

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