FridayOL

The Financial Conduct Authority (FCA) is issuing a stark warning to consumers seeking redress for mis-sold car finance: be extremely cautious of using claim firms. With the car finance redress scheme now firmly underway, the FCA is alerting individuals that handing over their claim to a third-party company could significantly reduce the amount of compensation they ultimately receive – potentially by as much as 30%.

Understanding the Car Finance Redress Scheme

For those unfamiliar, the car finance redress scheme was established following a review that revealed widespread historical failings in how lenders assessed affordability when providing car finance agreements between 2008 and 2020. Many consumers were sold loans they couldn’t realistically afford, leading to financial hardship. The scheme aims to compensate those affected.

Why the FCA is Concerned About Claim Firms

The FCA's concern stems from the fees these claim firms charge. While they promise to handle the claim process on your behalf, they typically take a substantial cut of any compensation awarded – often between 20% and 30%. This means that if you win your claim, a significant portion of your redress will go directly to the claim firm, leaving you with considerably less than you would have received if you’d pursued the claim yourself.

Claiming Directly: It's Easier Than You Think

The good news is that claiming directly from your lender is a perfectly viable option, and it's becoming increasingly straightforward. Lenders are now required to have established processes for handling redress claims, and the FCA has provided guidance to ensure these processes are fair and efficient. You can find templates and resources online to help you draft your claim, and many lenders offer online portals for submitting claims.

Here's a breakdown of why claiming directly is often the better choice:

• Higher Payout: You keep the full amount of compensation.
• Cost-Free: No hefty fees to pay to a third party.
• Control: You maintain complete control over your claim and can respond directly to your lender's inquiries.
• Simplicity: The process is simpler than you might think, with plenty of online support available.

What to Do If You’ve Already Instructed a Claim Firm

If you’ve already engaged a claim firm, the FCA advises you to carefully review their terms and conditions. Understand exactly what fees they will charge and what percentage of your compensation they will retain. Consider whether you can assign your claim to yourself, effectively cutting out the firm. Contact the firm directly to discuss this option.

Protect Yourself from Scams

Be wary of unsolicited calls or emails from claim firms promising guaranteed compensation. Always do your research and check if a firm is authorised by the FCA before instructing them. You can use the FCA’s Financial Services Register to verify their credentials.

The FCA's Message is Clear: Don't let claim firms take a significant chunk of your rightful compensation. Claiming directly is often the best and most financially rewarding route to redress for mis-sold car finance.

Resources:

• FCA Financial Services Register: https://register.fca.org.uk/
• FCA Guidance on Car Finance Redress: [Insert FCA guidance link here – search FCA website]