Claims firm opens new front in motor finance battle

A claims firm representing thousands of motor finance customers says it can secure much greater amounts than is being promised by the official redress scheme.

Barings Law said that in addition to claiming for undisclosed commissions, some people may be entitled to bring separate claims against lenders over unaffordable loans. 

Firms running these types of claims are engaged in a back-and-forth exchange with the Financial Conduct Authority, which created the redress scheme in response to the Supreme Court's ruling last year. The FCA estimates that payouts will average £829 per finance agreement.

North west firm Barings shows no sign of being cowed by the FCA's assertion that customers should avoid using CMCs or law firms. It represents 90,000 drivers nationwide and claims to have recently secured a payout of £22,000 for a motorist who was approved for two vehicle loans which were later deemed unaffordable, as part of a claim separate to the FCA redress scheme.

Robert Whitehead, Barings Law chairman, said: ‘Many consumers remain unaware that, in certain circumstances, they can also claim against the car finance company based on whether the finance was affordable in the first place.

‘Such affordability claims have not been publicised by the FCA and will not be covered by its redress scheme, meaning many consumers would potentially never know that they have such a claim or that the financial value of it could, in some cases, be far higher than their original commission claim.’

The firm said its affordability claims are currently securing average damages of approximately £4,800, with some settlements exceeding £22,000.

It argues that some people were given lending they were never realistically going to be able to sustain, with a resulting significant financial impact.

Whitehead added: ‘The concern now is that consumers are being pushed towards a simplified compensation process for undisclosed commissions, without understanding that they might have other, related legal claims that might in some cases lead to significantly better outcomes.’

In a separate development, the FCA said it has ‘serious concerns’ about how some CMCs and law firms have been operating in this sector. Customers have received unwanted texts or emails, been misled by advertisements and found it difficult or expensive to exit agreements. There is particular concern that some people may have been signed up to claims by clicking on a ‘free compensation checker’ on social media, when they did not intend to make claims at that stage. The FCA last week created a template letter for people to complain directly to firms.

But the regulator is also struggling to ensure compensation is paid through the scheme this year, as was previously promised. Legal challenges have been made from both claims representatives and various lenders which have delayed payments, and in a letter to the Treasury Committee last week the FCA chief executive Nikhil Rathi said payments are no ‘increasingly unlikely’ to be made before 2027.