Martin Lewis has issued an important update after it was announced that millions of people would receive compensation for missold car finance agreements between April 2007 and November 2024.
The Financial Conduct Authority has announced that as many as 14 million finance agreements may have been mis-sold, with lenders being ordered to pay out £8.2 billion in compensation.
This works out at around £700 compensation per person who was missold.
Now, the money saving expert has laid out the finer details of the ruling, while noting one important step people can take to make receiving their compensation more straightforward.
Advert
According to Lewis, the missold agreements fall into three categories and all of them rely on 'non-disclosure', meaning if you were told all the ins and outs of what you were being sold, which he says is unlikely, then you won't be eligible for the compensation.
The first category, which the financial journalist has spoken about publicly on many occasions, refers to discretionary commission arrangements, 'where it was hidden that the dealer effectively was getting more commission because you were charged a higher interest rate,' while you were none the wiser.
He noted, however, that most people still won't know if they fall into this category without putting in a complaint.
The next group is where the dealer was contractually tied to one lender, despite telling customers they would go to a panel of lenders to find the best deal, 'but in reality, one lender had first dibs and if it wanted to give you car finance, that is the deal that you were given'.
The third and final group refers to unfairly high commission, where the amount of commission was both more than 35 percent of the total cost of the credit, and more than 10 percent of the amount that you borrowed.
"If both of those things add up, then it's just seen as a distortion of the market and you were charged too much," Lewis explained.
So what do you have to do about it? Lewis said: "If you have already put in a complaint and that complaint means you were missold under those categories, when the redress scheme launches - probably in January or February next year - the car finance company will have three months to write to you and tell you you're included in the scheme and then you will automatically be included by doing nothing."
He continued: "If you haven't automatically complained, then the firm has to look and try to identify all the people who were missold under all these categories, and it needs to get in touch with you within six months of the scheme, but then you'll have to opt in and say 'I want to be a part of this and I want to get that money'."
In his expert opinion, Lewis said it would be a lot easier for those who fall into the 'already complained' category and suggested that anyone who isn't can put themselves into this group by complaining before the redress scheme starts next year.
To do so, all you need to do is head to the Money Saving Expert website and use the letter template to send to your lender.