Three incentivised hidden commissions

Did you know that 1 in 5 people have been mis-sold a car finance agreement? The Financial Conduct Authority (FCA) conducted a mystery shopping exercise, where they visited 122 motor retailers and brokers. In this exercise they found that only 25 retailers disclosed the full commission amounts to the customer! Meaning that information within contracts was difficult to find so customers were getting into finance agreements that weren’t suited to them. This leads to people paying more for car finance agreements and getting into debt.

What are incentivised hidden commissions?

The term incentivised hidden commissions refers to when a salesperson or broker is able to dictate the rate of interest (the higher the interest rate the more that can be earned in commission). The salesperson can raise the rate of interest to enable a large bonus at the end of the week or month, which leads to the customer paying more for the monthly payments of the vehicle.

Three incentivised hidden commissions:

Unregulated:

Within the FCA findings, there were a number of PCP firms carrying out deals without any regulation. The finance brokers that do this usually act without an oversight from the FCA. This will not only mean you as the customer is not protected, but it is also a criminal offence. An unregulated agreement can be signed on or off trade premises and there is no requirement to show an APR. There are also no repossession rights, statutory termination or protections for the customer.

Customer Overcharging:

The FCA has estimated that mis sold car finance is costing consumers £300m annually. Some of the cases have shown customers being overcharged over £1000 in interest rates so the dealership can obtain a higher commission. A typical mis-sold motor finance agreement of £10,000 can result in the customer paying around £1,100 more in interest charges.

Conflict of Interest:

A car dealership is supposed to be completely separate from finance providers. However, some salespeople are adjusting interest rates in order to earn more commission from the deal. Furthermore, there is an incentive for the salesperson to broker a finance deal at a higher interest rate, without the customer being aware.

Have I been mis-sold car finance?

Now that you know how common mis-sold car finance actually is, you may be wondering whether you have been mis-sold or not. Here are three things to look out for during a car finance deal:

1. Lack of affordability checks
2. Lack of clarity on commission and costs
3. Large final payment (balloon payment)

How to make a claim?

If any of this sounds familiar, there is a good chance you could've been mis-sold a car finance deal. PCP Claimsline is a Manchester-based firm who helps their clients claim compensation on mis-sold car finance and review car finance agreements Manchester for free. They can help to recover any money owed on a no-win-no-fee basis so there is no risk in starting a claim today.

Use the details below to speak to one of our expert claims handlers.