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Millions of drivers could be owed compensation for unaffordable and expensive car finance deals
Reported by The Sun Digital consumer Reporter Alice Grahns
MILLIONS of motorists could be owed compensation for car finance deals that are unaffordable or come with high commission rates.
A few weeks ago, an investigation by the city watchdog found that half a million people with car finance deals are being stung
The higher the interest rate brokers charge the more commission they're making
This report could eventually enable customers to claim refunds - similar to the how the PPI mis-selling scandal has hit banks with huge compensation bills, according to consumer rights experts.
The Financial Conduct Authority (FCA) warned that 560,000 customers could be paying a combined £300million more in interest - or 50 per cent more than they need to.
Its sample size was based on 60 per cent of the loans market, which means the issue is likely to be even bigger.
Even worse, many firms are so keen to sign PCPs, or personal contract plans, that buyers are not given enough time to properly understand the full details of their contracts.
The FCA said it would follow up with individual firms using these tactics, but in the meantime customers can still try and claim compensation.
Who could be eligible for compensation?
The report by the FCA highlights two problems, an expert told The Sun - and this is likely to affect who is eligible for compensation as well as how to claim it.
The first issue is where someone was sold a product at a higher interest rate than they should have been charged as it maximised commission.
The second problem is where consumers were sold unaffordable deals. For a deal to be considered affordable, you need to be able to make the repayments without hardship or having to borrow elsewhere.
There are currently about 6.2 million motor finance agreements in the UK, according to trade body Finance and Leasing Association (FLA).
Meanwhile, car subscription service Drover last year found that 28 per cent of motorists felt trapped in unaffordable car finance agreements.
As a result, it's expected that millions of Brits could be due compensation.
A lender has to check that you can afford the car finance before you both sign a contract.
This may mean checking not only your credit record, but also your income and expenses as well.
Article credit: Alice Grahns, Digital Consumer Reporter