A prominent North-West law firm has welcomed the FCA’s decision to investigate whether millions of people were overcharged for car loans, having issued more than 6,000 claims in the courts against some of the UK’s leading lenders, with thousands more to be issued soon.
Barings Law, which says it has been inundated by those believing they may have been potentially impacted, has called it a ‘necessary’ decision by the city regulator.
In addition to the legal action, the firm has also began successfully settling cases around other areas of motor finance mis-selling. It says it has received over 500 enquiries in the past 24 hours alone, from clients interested in joining tens of thousands of other claimants.
As it stands, around 10,000 people have complained to the ombudsman.
Certain lenders permitted dealers to manipulate interest rates, boosting the commission they earned.
As a result, these agreements established an incentive for brokers to raise the amount individuals were billed for their car loans, a practice that was banned by the FCA in 2021.
Yet, it still noted a substantial influx of customer complaints directed towards motor finance firms, seeking compensation for commission arrangements preceding the ban.
In an effort to prevent inconsistencies and inefficient outcomes for both consumers and the sector, the FCA has intervened by temporarily halting the process and initiating an investigation; but this has not stopped proceedings by Barings Law, or the hundreds of clients joining the action daily.
As a leading firm for PCP, Barings Law issued their motor finance undisclosed commission claims in the Birmingham courts a number of years before this FCA notice, alleging the relationship between those claimants and the finance providers was unfair, but within the meaning of ss.140A of the CCA 1974.
The firm’s 6,000 claims are across eight issued actions against some of the leading motor finance providers including Black Horse Limited, BMW Financial Services (GB) Limited and Volkswagen Financial Services (UK) Limited.
They say the unfairness to each claimant arises where the finance provider afforded the credit intermediaries a discretion as to the interest rate charged in return for higher commissions. Each claimant should have been made aware of this arrangement and given the opportunity to negotiate the interest rate.
Craig Cooper, Chief Executive of Barings Law, said: “We applaud the proactive stance taken by the FCA in addressing the potential chaos in the car loan sector as it paves a smoother path for consumers.
“This intervention will go some way in hopefully securing a fair and efficient resolution for both consumers and the industry.
“As a leading law firm in this particular action, we’re actively engaging with affected individuals to ensure they are well-informed and supported. Our commitment is to guide them through the process and explore potential avenues for redress.
“We are actively monitoring developments and will adapt our approach to ensure the best possible outcomes for those affected by the commission arrangements. We expect to issue several more thousand claims very soon.
“The collective action we’ve taken is rooted in the recognition that the sheer volume of claims would overwhelm the court system. While the FCA conducts its inquiry which aligns with our efforts, we are simultaneously pursuing legal avenues.
“Our goal is to expedite settlements, saving valuable court time and sparing numerous individuals from prolonged legal proceedings.”
The temporary suspension, initiated on Thursday, pertains to grievances related to motor finance agreements featuring a discretionary commission arrangement between the lender and the broker. This hiatus is expected to last for 37 weeks.
It encompasses complaints received by firms between November 17th 2023 and September 25th this year.
Moreover, consumers may now have an extended window of up to 15 months to refer their complaints to the ombudsman, deviating from the customary six-month timeframe, contingent on when the firm’s final response was dispatched.
But because Barings Law are submitting directly to the courts, they are unaffected by the FCA’s pause and are still onboarding claims.
Barings Law will be appealing previous judgements in a Birmingham hearing in the next few months which will assess whether the claims can be heard in the high court and whether they can be brought on ‘omnibus claim forms’.
Mr Cooper added: “I find the FCA’s intervention both necessary and commendable. It signifies a commitment to rectifying potential injustices and restoring order. Our focus at Barings Law aligns with ensuring a fair and transparent resolution for those affected by the commission arrangements.
“In the pursuit of justice and accountability, Barings Law stands alongside affected individuals. Together with the FCA, we aim to not only rectify past misconduct but also pave the way for a fair and trustworthy future in the car loan industry, where consumer rights are upheld and protected.”