Beware of Claim Firms: FCA Warns You Could Lose Up to 30% of Your Car Finance Redress
2025-06-06
Auto Express
The Financial Conduct Authority (FCA) is issuing a stark warning to consumers seeking redress for mis-sold car finance. As the long-awaited redress scheme nears implementation, the FCA is urging caution regarding the use of claim firms, highlighting the potential for significant deductions – up to 30% – from any compensation received.
What's Happening with Car Finance Redress?
Millions of drivers in the UK were potentially mis-sold car finance between 2008 and 2020. This stemmed from widespread failures by lenders to properly disclose commission paid to dealerships. The FCA has ordered lenders to compensate affected customers, and a redress scheme is now being rolled out.
The Claim Firm Risk: Why You Could Lose Money
While claim firms promise to handle the process on your behalf, they typically charge a commission fee for their services. Critically, the FCA's redress scheme allows lenders to deduct these fees directly from your compensation payout. This means if you use a claim firm and they charge a significant fee (potentially up to 30% of your redress), that's exactly how much you could lose from your compensation.
FCA's Advice: Go Direct!
The FCA strongly recommends that consumers submit their claims directly to their car finance provider. This allows you to receive the full redress amount without any third-party commission deductions. The process may seem daunting, but the FCA provides guidance and resources to help consumers navigate the claim process themselves. Several free tools and templates are available online to assist in preparing your claim.
Understanding the Deduction Process
Here's a breakdown of how the deduction process works:
- You submit a claim to your car finance provider.
- The provider assesses your claim and, if successful, calculates the redress amount.
- If you used a claim firm, the provider will contact them to determine the agreed commission fee.
- The commission fee is then deducted from your redress payout before you receive the remaining amount.
Is Using a Claim Firm Ever Justified?
The FCA acknowledges that some individuals may find it difficult to navigate the claim process alone. However, they stress that consumers should carefully consider the potential costs and risks before engaging a claim firm. If you do choose to use a claim firm, ensure you fully understand their fees and how they will be deducted from your compensation. Compare quotes from multiple firms and read reviews before committing.
Protect Yourself: Key Takeaways
- Submit your claim directly to your car finance provider whenever possible.
- If using a claim firm, understand their fees and how they will be deducted.
- Compare quotes from multiple claim firms.
- Be wary of firms that guarantee a specific outcome.
- Consult the FCA website for guidance and resources.
By taking these precautions, you can maximise your chances of receiving the full redress amount you are entitled to under the car finance redress scheme. Don't let claim firm fees eat into your compensation – claim directly and keep more of what’s rightfully yours.
