Latest news with #DCAs
Yahoo
2 days ago
- Business
- Yahoo
Lloyds faces questions on ‘no harm' claims amid mounting provisions
As the UK Supreme Court prepares to rule on whether car finance providers broke the law by failing to disclose commission arrangements to borrowers, a central question is coming into focus: how do lenders, such as Lloyds, justify claims of 'no harm' to customers while setting aside billions of pounds for potential redress? Lloyds Banking Group, the UK's largest motor finance lender, is at the centre of this debate. CEO Charlie Nunn told MPs on 20 May that Lloyds had seen 'no evidence of harm' in its car finance activities and argued that its motor finance arm, Black Horse, typically offered some of the lowest interest rates in the market. On that basis, he said, customers were unlikely to have found better deals elsewhere, even if dealer commissions were not disclosed. But the bank has also made two significant financial provisions. A £450 million charge was booked in late 2024 concerning the Financial Conduct Authority's (FCA) review of discretionary commission arrangements (DCAs). A second, £700 million provision followed earlier this year, after the Court of Appeal ruled that the non-disclosure of commissions could give rise to a claim in other consumer credit spaces beyond motor finance. This appears difficult to square with a claim of no customer detriment. Nunn, however, told the Treasury Select Committee that these charges should not be interpreted as admissions of harm but viewed as a result of unavoidable accounting principles. "That £450 million provision incorporates two things. One is the operational expenses of responding to claimant law firms. We have had a very large number of complaints that aren't even from our customers, so we know there are significant operational expenses in processing and trying to help customers. I don't know if they even had a policy with us, but there is a very high percentage of those. It is processing the operational complaints, supporting the customers and, if there is remediation linked to harm, paying out that remediation. "We haven't disclosed the split between those two things, but we obviously have experience. The operational expenses are very significant. We knew, based on actions that the FCA has announced, that we were going to incur significant costs. From an accounting perspective, we are legally obliged to do that. That is not linked to decisions that the FCA and Supreme Court will take on whether there was a breach of a law, whether there was harm, and if there was harm, whether appropriate remediation should be made. All those steps are independent of the accounting provision. I know that probably isn't helpful for the public, but that is the basis on which we make those decisions," he told the Committee. Even so, these provisions may also reflect the scale and complexity of proving no harm, rather than simply responding to complaints. Julian Rose, Director at Asset Finance Policy Limited, has pointed out that under the current FCA regime, the burden of proof lies with lenders. If the Supreme Court confirms that firms were required to disclose commissions, it will fall to the lenders to demonstrate that customers were not financially disadvantaged. 'In my view,' Rose writes, 'it will not be for consumers (or their representatives) to show evidence of harm. It will be for the car finance companies to show evidence of no harm. That means for each agreement, they will need evidenced that the rate provided was competitive with an industry benchmark rate.' That challenge will be especially difficult if firms no longer hold the necessary data. But will it prove more expensive for claimants or lenders? Most lenders follow standard data retention policies that delete customer records after six years. According to a recent Guardian report, claims firm Courmacs Legal says it holds around 465,000 customer complaints involving loans settled before 2018, many of which may now be missing documentation. If these consumers cannot be contacted or their agreements reviewed, they could lose out on up to £1.18 billion in compensation, Courmacs estimates. In January 2024, the FCA instructed firms not to delete car finance records while its investigation continued. But that came too late for many historical agreements. In a statement to the Guardian, the FCA said: 'If we decide to undertake a redress scheme, we will work with industry and other interested parties to ensure that it is as clear and straightforward as possible for customers to complain.' The Financing and Leasing Association (FLA), which represents major lenders including Lloyds, Santander UK and Close Brothers, has acknowledged the limitations of missing data. 'We have made clear to the FCA that consistent and fair outcomes cannot be delivered with patchy or absent data,' the FLA said. While the FCA has not yet confirmed whether a formal redress scheme will be introduced, a ruling in favour of borrowers by the Supreme Court would put pressure on the regulator to act. And if a scheme is mandated, firms will need robust documentation systems to avoid defaulting to redress. This may explain why Lloyds has already put aside more than £1.1 billion, regardless of its position that customers were not harmed. If the bank intends to prove that its loans were competitively priced, the ability to evidence that across thousands of legacy agreements will be critical — and expensive. As Rose argues, operational readiness will be key. 'There needs to be a standard table showing benchmark rates for similar loans and for similar customers,' he notes. 'Where the customer paid near the benchmark or below it, then it should be reasonable to assume there was no harm.' In the absence of such evidence, however, lenders will struggle to prove their case. Lloyds may not have admitted liability, but its financial provisions suggest it is preparing for a process where outcomes may hinge not on clear evidence of harm, but on the inability to demonstrate that harm did not occur. "Lloyds faces questions on 'no harm' claims amid mounting provisions" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Daily Record
21-05-2025
- Automotive
- Daily Record
Martin Lewis urges people to put car finance claim in before ruling due in July
Any compensation payout will be made automatically, but the consumer champion urged people to 'get ahead of the queue'. The Martin Lewis Money Show Live returned to TV screens on Tuesday for an hour-long summer special where the consumer champion shared an update for millions of people waiting to hear if they are due a compensation payout of around £1,100 for hidden Discretionary Commission Arrangements (DCAs). The consumer champion told STV viewers how the Supreme Court is deliberating over an appeal it heard in April and an outcome is likely around July. He was asked if it was still worthwhile putting in a claim as the Financial Conduct Authority (FCA) has previously said any compensation would be automatic. But the financial guru advised it was a good idea to make a climax now so that all the administrative work is in place before any ruling is announced, though he also said it was fine to wait until the decision is made. He did, however, urge people to use a free online claims service - there's one on here. Lisa contacted the programme and asked: 'It would be great to get an update on car finance, I believe I could be eligible due to having cars on DCAs but never got round to putting my claim in. I have now read that if you are due any payout, you will be contacted and repaid automatically, without filling anything in. Is this right?' Martin responded: 'Yes, basically around 2.5 million people have put DCA claims in. Discretionary Commission Arrangements, that's effectively where car dealers charge higher interest than they needed to and they got more commission for doing so and the regulator (FCA) is investigating that. 'The most important thing to understand is car finance claims are currently on hold because the Supreme Court is looking at a case right now, it's already heard evidence on it and we're waiting for a decision, now no-one knows when that will come - we just don't know.' However, Martin added that the 'people in the know are telling me they're hoping it will be July, so I'm going to say July-ish is the probably rough time span'. But he also advised that until then 'nothing else happens'. Martin went on to explain how the FCA has said that if they are going to be payouts, nobody will need to claim them as they would be issued automatically. However, he added: 'I would still suggest if you want to get ahead of the queue and make sure all the admin is done right and they have all your details and they're all up-to-date. I would still probably just go and put your claim in now, but only use a free service. 'But you don't have to, if you just want to wait, if you are eligible you should be paid out - if the Supreme Court rules saying that car finance and the way it was done should be paid out.' Martin has previously estimated that compensation of around £1,100 could be due on around 40 per cent of all car finance deals made between April 2007 and January 28, 2021. That means anyone who took out finance with the 'hidden DCA charge' to purchase a van, campervan or motorcycle during that period, may be entitled to a refund.
South Wales Guardian
21-05-2025
- Automotive
- South Wales Guardian
Martin Lewis issues important update on car finance claim
Now, finance guru Martin Lewis has issued an important update when it comes to car finance scandal claims. The Money Saving Expert said he expected an update in July after the UK's Supreme Court heard a case at the start of April, which many hope the outcome will determine whether they receive compensation. Financial providers have been accused of using discretionary commission arrangements (DCAs) to increase interest rates on motor finance. Did you get a car, van, motorbike on finance pre 28 Jan 21? Millions are owed £1,000s due to a NEW hidden commission scandal. Watch full show at Free complaint tool at Around two-and-a-half million people have now put DCA claims in. Addressing the scandal on his Martin Lewis Money Show on Tuesday (20 May), Mr Lewis said: 'The people in the know are telling me the decision will be in July.' The majority of cars sold in the UK are bought with finance agreements. These loans enable drivers to pay a deposit and then spread the cost of a new vehicle over several years. It was discovered that car dealers, acting as loan brokers, earned a commission based on the interest rate charged to the buyer for Personal Contract Purchase (PCP) and Hire Purchase agreements. These cover about 40% of all car finance agreements. Recommended reading: The higher the interest rate charged to the consumer, the more commission the dealer made. Car dealers were incentivised to make loan agreements with higher interest rates. The practice, known as discretionary commission arrangements (DCAs), has left many drivers paying hundreds and even thousands of pounds more for their vehicles.
Daily Record
13-05-2025
- Automotive
- Daily Record
New Martin Lewis update on possible £1,100 car finance compensation payout for millions of people
The outcome of a Supreme Court case on hidden commissions could result in refunds for vehicle owners. Millions of people across the country who took out car finance before 2021 may be due a compensation payout of around £1,100 if the Supreme Court finds widespread failings by firms meant they lost out due to 'hidden commission'. In April, it heard an appeal against the Court of Appeal's judgment on the matter. Martin Lewis and the MoneySaving Expert ( team first highlighted how the Financial Conduct Authority (FCA) was investigating complaints over past use of motor finance Discretionary Commission Arrangements (DCAs) last year. Taking to social media on Monday, the consumer champion said there's been no update on the outcome, but a decision on the case is likely to be in July. Posting on X, formerly Twitter, the financial guru said: 'What's happening with car finance reclaiming? I'm being asked this a lot. No update I'm afraid, the Supreme Court case has been heard and everything is now waiting for its decision. There is no way to know when that'll happen but many I speak to have a working assumption it'll be July.' Martin has previously estimated that compensation of around £1,100 could be due on around 40 per cent of all car finance deals made between April 2007 and January 28, 2021. That means anyone who took out finance with the 'hidden DCA charge' to purchase a van, campervan or motorcycle during that period, may be entitled to a refund. The FCA is not planning to make any further announcements until after the Supreme Court has announced its decision. However, in March the FCA said it would consult on an 'industry-wide redress scheme' within six weeks after the Supreme Court announces its decision. At the time, the FCA said: 'We are currently reviewing the past use of motor finance Discretionary Commission Arrangements (DCAs). We're seeking to understand if firms failed to comply with requirements relating to DCAs and if consumers lost out as a result. If they have, we want to make sure consumers are appropriately compensated in an orderly, consistent and efficient way.' The FCA said that when it launched its review last year, a ruling by the Court of Appeal has 'raised the possibility of widespread liability among motor finance firms wherever commissions were not properly disclosed to customers'. The regulator continued: 'The Supreme Court will hear an appeal against the Court of Appeal's judgment on 1 to 3 April. We have been granted permission to intervene in the case and have filed our submission with the Court. 'We want to provide as much certainty as possible to firms, consumers and stakeholders. So, we are confirming that if, taking into account the Supreme Court's decision, we conclude motor finance customers have lost out from widespread failings by firms, then it's likely we will consult on an industry-wide redress scheme. 'We previously said it is more likely than when we started our review that we will introduce an alternative way of dealing with complaints.' The FCA said that under a redress scheme, firms would be responsible for determining whether customers have lost out due to the firm's failings. If they have, firms would need to offer appropriate compensation - the regulator would set rules firms must follow and put checks in place to make sure they do. The FCA explained: 'A redress scheme would be simpler for consumers than bringing a complaint. We would expect fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive. It would also be more orderly and efficient for firms than a complaint led approach, contributing to a well-functioning market in the future.'
Wales Online
12-05-2025
- Automotive
- Wales Online
UK car finance scandal: Key dates and guide to claiming £1,000s in overcharges
If you entered into a car finance agreement within a specific timeframe, you might be entitled to a substantial refund. Every day, My Claim Group, an organisation assisting individuals who were unjustly overcharged for car finance over a 14-year span, is being contacted by tens of thousands of people who believe they are owed cahs. Depending on the outcome of a significant court case, tens of billions of pounds could potentially be reimbursed to UK drivers in the forthcoming months. Those who initiated a car finance agreement between 2007 and 2021 may have been wronged without even realising it. As the court case related to this scandal approaches its conclusion, we've compiled a comprehensive guide to help you understand the situation. (Image: Maksym Belchenko via Getty Images) What are we waiting for? On April 1 (no joke), the Supreme Court commenced its hearing to determine whether the Court of Appeal's ruling should stand. The Court of Appeal's decision, which deemed all car finance agreements with hidden commissions as unlawful, took many by surprise. This ruling implies that a larger number of people will be eligible for refunds from lenders. Currently, we're awaiting the Supreme Court's decision on whether to overturn this ruling. Car finance companies Close Brothers and Motonovo appealed to the UK's highest court following the Court of Appeal's verdict in October of the previous year. When can we expect the judgement? Supreme Court rulings typically take anywhere from a few weeks to several months. Given the importance of this case, it will likely be fast-tracked, although the exact timing of the ruling remains uncertain. What would be the implications if the Supreme Court reverses the decision? Although the number of individuals entitled to compensation would decrease, a significant number would still be due money. This is because two types of car finance mis-selling are currently under scrutiny: Discretionary Commission Arrangements (DCAs) and Commission Disclosure complaints. So, what exactly is a DCA? Approximately 40% of car finance agreements from 2007 to 2021 fall under DCAs. Brokers and dealers often inflated the interest customers had to pay on their car finance, typically without informing them, on Personal Contract Purchase (PCP) and Hire Purchase agreements. This was done to boost their commission. And what constitutes a Commission Disclosure complaint? This is the primary focus of the ongoing Supreme Court hearing and stems from the Court of Appeal's ruling that car finance agreements failing to disclose all details of commission were unlawful. This includes the amount brokers would receive as commission, which was seldom revealed. Money Saving Expert estimates that this applies to 99% of car finance cases, including DCA cases. If upheld, this could imply that 99% of all individuals who entered into car finance deals between 2007 and 2021 might be owed money. So, what's the next step? Once the Supreme Court delivers its verdict, the Financial Conduct Authority has pledged to outline the subsequent steps within a matter of weeks. If the Court of Appeal's judgement is reversed, approximately 40% of individuals who entered car finance agreements during the relevant period will be eligible for refunds. The total sum could potentially reach around £10 billion. However, if the ruling is upheld, the number of claimants could significantly increase, and the compensation pot could well surge into tens of billions of pounds. Is it advisable to lodge a complaint at this stage? Absolutely. While the Supreme Court Case's outcome might necessitate lenders to proactively reach out to potential refund recipients, submitting a claim ensures you're less likely to be overlooked for any reason. This is especially crucial if you have relocated since purchasing a vehicle on finance, plan to move soon, or have had any changes to your contact information.
