car finance claims are at the centre of a regulator warning as the financial regulator prepares a free-to-use redress scheme for millions of people potentially due compensation for mis-sold car finance. The regulator has told private claims management firms they must treat customers fairly and flagged risks to consumers from high fees. Consumers are also being urged to watch for exit fees if they switch claims to the free scheme.
Regulator warnings for car finance claims
The financial regulator has moved to intervene after a large number of compensation claims were taken up by private claims management firms. The regulator is set to announce its own free-to-use scheme intended to serve millions of people who could be owed redress because the car finance deals they signed were mis-sold. At the same time, private claims management firms that have already handled many of these cases can take as much as 40% of any compensation eventually paid out.
Immediate reactions and consumer risks
The regulator’s warning highlights two immediate risks for consumers: high commissions charged by some claims management firms and so-called exit fees that can be applied if a consumer chooses to move their case into the regulator’s free scheme. The notice to consumers stresses they should guard against large charges to pull out of an existing claim if they wish to switch to the free option. Separately, the payments landscape is shifting online with retailers encouraging customers to use pay by bank methods; while this can lower retailer costs it may leave shoppers with weaker consumer protection compared with card payments.
Quick context
Private firms have already taken on many motor finance claims, and the regulator’s free-to-use plan is framed as an alternative to firms that can retain a substantial portion of awards. The issue centres on mis-sold motor finance agreements and the scale of those potentially affected.
What’s next for car finance claims
Expect close scrutiny of the new scheme when the regulator makes its announcement, and watch for guidance on how consumers can transfer existing claims without incurring steep exit fees. Enforcement activity or further consumer protections could follow if firms fail to meet the regulator’s fair-treatment standards. For people with ongoing or potential claims, monitoring formal guidance from the regulator will be essential before deciding whether to remain with a private claims manager or move into the free-to-use scheme for car finance claims.
