Tsunami of Mis-sold PCP Claims Worries Banks

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Author: Samuel Beckingham
Updated: Feb 28, 2024
4 minutes read

The Financial Conduct Authority (FCA) is heading an investigation into more than 10,000 complaints about mis-sold PCP deals, and banks are worried about handing refunds to customers. It’s all due to the unfair practice of upping commission to increase loan amounts. While the results aren’t expected until September, banks have started to set aside millions in preparation.

Example of Qualifying Claim

Mrs Young spent over £7,600 on a used car back in 2016. Without her knowledge, the salesperson earned a secret commission because she agreed to a higher amount of interest on her loan. Because Mrs Young had been denied loans on four previous occasions, she was more likely to accept this deal.

When she took her case to the Financial Ombudsman Service (FOS), they ruled that Mrs Young had paid hundreds more than she otherwise would have done. Due to the hidden commission, she was then awarded £630.

Scale of the Problem

Although Mrs Young’s award is relatively small, other successful cases have been awarded thousands for flagrant mis-selling practices. It’s because of the length of the investigation and historic payouts that banks are becoming increasingly worried.

Mis-sold PCP could be the new PPI scandal to rock the nation, and estimates as to how much will be repayable vary wildly. Citibank is hoping for a more conservative £9 billion that banks will be charged, while HSBC analyses the problem could cost as much as £16 billion.

These figures have caused several banks to set aside funds or stop dividend payments altogether amid fears of widespread payouts. Lloyds Bank has set aside £450 million, while Close Brothers pulled the plug on a £100 million dividend.

It has been highlighted how there is an unfairness in the situation between banks and brokers. While responsibility has been pushed onto the banks, the brokers were still involved in the process. Nevertheless, the investigation is still ongoing.

You can see how new car finance deals keep cars on the road in the interactive graph below.

Mis-sold PCP Claims

During the 2010s, there was a car finance lending boom. Private car sales lending at dealerships tripled between 2011 and 2018. According to HSBC, this rose from £14 billion to £46 billion.

Black Horse, part of Lloyds Bank, controls 20% of the car finance market, so it’s no wonder they’re feeling uneasy about the whole situation. As the most exposed bank, they could be obligated to return £1.3–£2.4 billion.

The FCA is looking into claims from as far back as 2007, so the scale of the problem could be enormous when they come to publish their findings.

The FCA Investigation

Even though discretionary commissions have been banned from car finance agreements since 2021, some banks are quick to point out that they followed the rules that were in place at the time. Historic deals since 2007 could have been guilty of this practice, and it’s uncertain whether qualifying drivers will receive compensation because of this.

The basic aim of the investigation is to ascertain whether there was widespread misconduct and that consumers have lost out in the process. Ultimately, if anyone is owed compensation, they will see an appropriate settlement.

Not all banks have been as startled by the investigation as Lloyds. Other banks have such little stake in the car finance market that they aren’t worried about the repercussions of what the FCA decides. NatWest has had no exposure to the market, while Barclays only has a 2.5% share.

Make a Mis-sold PCP Claim

The undisclosed commissions on a car finance deal is just one aspect that you can make a complaint about. You could have been mis-sold your car finance for a whole host of reasons, including not having the terms and conditions properly explained. At any rate, you can still submit complaints.

If you’re ready to start your mis-sold PCP claim, use the button below to check your eligibility.