Mis-sold car finance claims

Purchasing a new car is a major life decision. Once taken you're committed to years of payments plus unexpected costs for repairs, insurance and more

Fortunately there are many ways to increase the affordability of a car and a finance agreement is one of them

However, such car finance agreements are often sold with PPI attached which pockets the salesman massive amounts of commission. If the commission is not properly disclosed, then your policy could have been mis-sold


Need to know

  • Car salesmen receive commission for both the sale of a car and the sale of a car finance plan with a PPI policy attached
  • These commission rates are often large, sometimes more than the value of the car itself, so it is in the interest of the salesman to sell you a car through a finance plan, that way they get a huge bonus.
  • However, a recent Supreme Court ruling has deemed that hidden commissions are unfair and there could be grounds to claim
  • It could also mean that many people were unfairly rejected from claiming and this could open the gates for them to try again

Hidden commission history

  • In November 2014 the Supreme Court ruled that undisclosed commissions on a PPI policy purchased by former college lecturer Susan Plevin were in breach of the Consumer Credit Act 1974 (see here for more information)
  • The court ruled that the agreement between the lender and the borrow was unfair as a result of the lack of information provided regarding the commission payment
  • It was discovered that the client was notified that commission would be paid yet the amount and destination of the payments were not disclosed
  • In this instance the commission rate was more than 70 per cent of the clients PPI premium (72% of £5,780)
  • The case was the first of its kind and has forced the Financial Conduct Authority (FCA) to rethink the rules on PPI compensation

How do I know if there was hidden commission?

  • If you were offered a PPI policy to protect your car finance, it’s likely the product was provided by a third party which will be clear in your contract
  • If the policy was provided by a third party then it’s likely they were paying the salesman commission on your PPI payments
  • If that commission was not disclosed to you, or it wasn’t made clear what percentage of your payment was commission, it’s likely to have been in breach of the 1974 Consumer Credit Act and therefore was mis-sold

The inside track

  • The PPI bill is huge, it has cost banks more than £24bn to date and could raise by a further £33bn due to hidden commission on products like car finance
  • The Financial Conduct Authority (FCA) is trying to decide on a proposed deadline date for PPI claims which will bring new claims to a close
  • PPI claims are expected to be time limited to Spring 2018 including claims for mis-sold or hidden commissions
  • If you want to find out more about the Plevin V Paragon Personal Finance case or about hidden commissions, have a look at our 1-minute guide for more information

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