Car Finance Industry: FCA investigation

In 2019, the Financial Conduct Authority (FCA) conducted an investigation into the car finance industry. The investigation found that a staggering 92% of car finance sales were mis-sold in some way, revealing a widespread lack of transparency and poor practices in the car finance industry. The investigation found that many consumers were not fully informed about the terms and conditions of their car finance agreements. This led to misunderstandings and disputes. Dealers also sold many consumers additional products, such as extended warranties and insurance, that they did not need or want. The investigation also revealed that dealers sold many consumers car finance products with high interest rates. This led to unaffordable payments and financial hardship.

The investigation found that many car finance brokers were not disclosing hidden commissions they received from lenders. These commissions were not disclosed to customers and resulted in consumers paying higher interest rates and higher overall costs for their car finance products. The FCA also found that many brokers were using discretionary interest rates. This allowed them to alter the interest rate given to customers. This allowed brokers to push higher rates to unknowing customers, resulting in higher commissions for themselves.

The FCA’s findings were particularly concerning as car finance is a significant financial commitment for consumers, and misselling can lead to severe financial hardship. The FCA issued a warning to car finance companies, stating that they must improve their practices and treat customers fairly. Consumers should be aware of their rights and be vigilant when purchasing car finance products, carefully review the terms and conditions of any agreement and consider whether the product is suitable for their needs and circumstances. Consumers should also be aware that they have the right to request a full breakdown of costs from the lender. This includes any commissions or fees from the broker.

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My Claims Centre - FCA Investigation - Car Finance Claim