A legal claim is being launched against three of the country’s largest motor finance companies for incentivising car dealerships to sell expensive finance to buyers of second-hand cars.
If successful, the action could trigger damages of £1billion, with around one million people eligible. In the 2010s, loan providers gave car dealers discretion to sell loans to motor buyers with a range of interest rates.
The higher the interest rate a dealer got a customer to sign up to, the more commission they received – and the more profit the loan company made on the finance. Such discretionary commission was banned by the Financial Conduct Authority (FCA) in 2021 in order to ‘protect consumers’.