FridayOL

Millions of Canadians who financed a car between April 2007 and January 28, 2021, could be entitled to compensation following a landmark investigation into discretionary commission arrangements (DCAs). Consumer advocate Martin Lewis has previously estimated that around 40% of car finance deals during this period may have been affected, potentially leading to redress payments averaging around £1,100 (approximately $1,900 CAD).

What are Discretionary Commission Arrangements (DCAs)?

DCAs allowed car dealerships to receive undisclosed bonuses from lenders based on the interest rates they charged customers. This practice raised concerns that dealerships were incentivized to push customers towards higher-interest loans than they needed, effectively increasing the cost of car finance without transparency.

The FCA Investigation and Potential Redress

The Financial Conduct Authority (FCA) in the UK launched an investigation into DCAs, concluding that the arrangements were likely to have resulted in customers paying more for their car finance than they should have. As a result, a redress scheme is being established to compensate affected individuals.

Who is Eligible for Compensation?

To be eligible for compensation, you typically need to have taken out a car finance agreement between April 2007 and January 28, 2021, where the lender had a DCA in place. The compensation amount will depend on the difference between the interest you actually paid and what you would have paid without the DCA.

How to Claim

The process for claiming compensation is still being finalized, but here's what you can expect:

• Lenders will contact affected customers: Many lenders are proactively contacting customers they believe may be eligible.
• Check your finance agreement: Review your car finance agreement to see if it mentions a discretionary commission arrangement.
• Submit a claim: Follow the instructions provided by your lender to submit a claim for compensation. If you haven't heard from your lender, contact them directly.

Martin Lewis's Advice

Consumer champion Martin Lewis has been a vocal advocate for affected car finance customers. He emphasizes the importance of checking eligibility and submitting a claim. He also advises caution against scams and only dealing directly with your lender or reputable organizations.

Important Considerations

• Time is of the essence: While there's no strict deadline yet, it's advisable to check your eligibility and submit a claim as soon as possible.
• Be wary of claims management companies: Many companies offer to handle your claim for a fee. However, you can typically submit a claim yourself without incurring any charges.
• Keep records: Maintain copies of all correspondence and documents related to your car finance agreement and your claim.

This potential redress scheme offers a significant opportunity for millions of Canadians who financed a car during the specified period. By understanding your rights and taking appropriate action, you can potentially recover a portion of the excess interest you paid.