Last week, the Financial Conduct Authority (FCA) gave its first real indication of how it plans to deal with complaints around historic Discretionary Commission Arrangements in car finance. While the ruling was more limited than some had hoped, it still marks a major win for consumers, and it has only come about thanks to the work of the claims management industry.

Here is what you need to know about the ruling and what it might mean for your own potential car finance claim.

What did the FCA actually say?

In short, only Discretionary Commission Arrangements (DCAs) will be valid grounds for a car finance claim.

That means if your car finance agreement did not include a DCA, where the broker was rewarded for increasing your interest rate to boost their commission, then you are unlikely to be eligible for a refund. Other commission models, such as flat fees or fixed-percentage commissions, are not included in the FCA’s proposed redress scheme.

While this might sound narrow, it is still a significant ruling. DCAs were widely used across the industry until they were banned in 2021. Now, anyone who took out a car finance agreement during that time could be eligible for compensation.

What happens next?

The FCA is expected to impose a blanket redress scheme covering DCAs only. While we are still waiting for full details, a few key points are already becoming clear:

• Payouts may not be as high as originally expected. A blanket approach is likely to lead to standardised compensation amounts rather than personalised redress based on your individual agreement.
• Lenders will be responsible for identifying affected customers. That means they will need to review historic agreements and customer data to find those who had a DCA, regardless of whether a claim has been made.

This approach may limit the value of claims and puts the burden on finance companies to track down both the customers and the credit agreements.

Things to consider if you think you had car finance

If you think you might be affected by the ruling, it is worth taking a few steps now:

• Do you know who your finance provider was?
  Many people took out car finance through dealerships and never knew who the actual lender was.
• Have you moved address since taking out the agreement?
  If your current contact details do not match those on the original agreement, the lender may not be able to reach you.
• Have you changed your name?
  If so, this could make it more difficult for a lender to match you to your historic finance record.
• Is the finance company still trading?
  Some providers no longer exist or have changed names. Even so, your agreement may still be traceable.
• How can you tell if your agreement included a DCA?
  This is the big question. Most customers were never told how their broker was paid. In many cases, you would need to access the original agreement, or rely on the lender to confirm the commission model used.

Why this is still a huge win for consumers

While the FCA has limited its ruling to DCAs, this is still a major step forward for consumer rights, and it has come about because of the pressure applied by the claims industry.

We were the ones who identified the lack of transparency in commission arrangements. We supported thousands of consumers to bring forward complaints. And our collective efforts led to DCAs being banned in 2021.

Now, even those who never made a claim, or did not know they could, may receive compensation.

As we saw with PPI, the claims industry often gets a bad rap. But the truth is, we identify regulatory breaches and help put money back into the hands of ordinary people. That is exactly what is happening here.

What should you do now?

The FCA will confirm the full process and timeframes soon. In the meantime, it is a good idea to:

• Gather any car finance paperwork you still have
• Check your credit report for finance company names
• Make sure your contact details are up to date with any providers you used

If you are not sure where to start, we are here to help. Claim My Loss is already working with clients to prepare for the next phase, from identifying old credit agreements to getting ready for when the FCA’s scheme goes live.

Even if the payouts are smaller than expected, the ruling confirms one important fact: consumers were treated unfairly, and that is now being put right.

We will keep fighting to make sure as many people as possible get what they are owed.

Ready to get started?