Discretionary Commission Arrangements - Compaints and refunds


CarFinance 247 has been described as the UK’s leading digital car finance platform, connecting buyers, sellers and lenders.

The firm, based in Manchester, was founded in 2006 by Reg and Louis Rix as a car loans brokerage to meet the growing market of consumers looking for car finance online.

So what is Car Finance, and what are the main Car Finance options?

Car finance is a multi-billion-pound industry; recent figures from the Finance & Leasing Association show that its members provided £37 billions worth of new consumer vehicle finance deals in the UK in 2021 (for both new and used cars).

A new car often will set you back thousands of pounds, and most of us cannot afford to pay this in one go; saving up for one would of course be the ideal, but as a car is a necessity for many of us, either due to an old car failing, or a growing family meaning you need more seats etc., car finance is a way of obtaining those 4 wheels straight away without having to wait for your savings to cover the cost. Car finance is one way to spread the cost of a vehicle over a number of months or years.

The main car finance options are:

Personal contract purchase (PCP). This is the most common type of car finance. PCP is effectively a loan to help you get a car. But unlike a normal loan, you don’t borrow the full price of the car, and you won't own it at the end of the deal (unless you choose to pay a much larger final payment – called a balloon payment). You pay a deposit (usually at least 10% of the car’s value), then make a set number of monthly repayments. The repayments are based on the price of the car, the APR (interest rate) and the expected depreciation (the amount the car’s value is expected to drop by over the course of the loan).

Hire purchase (HP). Hire Purchase agreements are relatively uncomplicated. This is where you pay off the value of the car, plus interest in monthly instalments over a fixed term (you do pay a deposit, again, usually at least 10% of the car’s value). The loan is secured against the car, so you don’t own the vehicle until the last payment has been made.

Personal Contract Hire (PCH). PCH is more generally known as leasing, and is not dissimilar to renting a car. You pay a deposit (usually the equivalent of three to six times the monthly repayment), pay an agreed amount per month, and get use of the car for the duration of the loan/term. Most car leasing contracts are for two to five years, and typically, the longer the agreement, the lower the monthly repayments.

The significant difference between PCH and PCP is that with PCH you do not have the option to buy the car at the end of the contract.

Problems and complaints with CarFinance247 and other Car Finance companies

Car finance is now more popular in the UK than ever before, which may account for it being the second most complained about financial product by consumers, with over a third of financial product complaints being made against car finance firms like Carfinance247.

An investigation conducted by the Financial Conduct Authority uncovered evidence of widespread mis-selling across various types of vehicle financing, including personal contract hire (PCP) and hire purchase (HP) agreements.

Unbeknown to consumers, lenders have regularly incentivised brokers and car dealers to charge their customers higher interest rates by paying the dealership larger commissions in return. As one car dealer openly admitted in a recent article, "frankly, we were getting away with murder. We weren’t treating customers fairly and were, in effect, charging them to earn us money."

Complaints range from consumers paying more than they expected, to cars being unfit for purpose, with the main complaint being that they were mis-sold the car finance.

What constitutes the mis-selling of car finance?

Essentially, this is a type of mis-selling where the customer has been sold a car finance product that is not right for them and their circumstances. In the last few years, the FCA (Financial Conduct Authority) has become more focused on guiding consumers towards better value/more appropriate car finance deals, with “affordability” being the crucial element. Perhaps unfortunately for lenders, this has led to a rise in new regulations and more stringent enforcement. Despite this, consumers are still being mis-sold car finance, across all types of car finance options. According to the FCA, the majority of mis-selling can be traced back to how lenders tackled the fundamental risk in selling a financial product that is both complex and volatile.

The following scenarios are all examples of car finance mis-selling:

  • Validation of your income and outgoings and credit checks to assess “affordability” were incorrectly assessed.
  • You took out the finance at an inappropriately (given your financial situation) high interest rate as the lender/salesperson did not satisfactorily and comprehensively set out the interest charges to you, and you now do not understand what you signed.
  • The lender/salesperson did not explain the deal properly. This could happen if you felt pressured or rushed by the lender/salesperson to make a decision, or if the lender/salesperson had insufficient knowledge to explain properly.
  • The lender/salesperson failed to correctly explain the commission details and it transpires that your deal was more expensive than it needed to be as the dealer was in line for a substantial commission by charging you more. The Financial Conduct Authority estimates that up to 95% of car finance deals have had some form of commission model. Appallingly, in approximately four in ten of those agreements, the higher the interest rate you were charged, the more commission the broker would get. Though this commission framework was vetoed in January 2021, many customers who took out car finance before then may have been affected.
  • You thought you were paying off the car and that you would own it at the end of the term.PCP contracts for example are hugely complicated. If any aspect of the contract wasn't made clear, you can argue that it is unfair.  Many PCP customers believed they were entering into a hire purchase deal, effectively paying down the value of the vehicle to own it at the end of the term, when in actual fact their deal incurred a balloon payment at the end which they often couldn't afford.
  • If the lender/salesperson “recommended” a certain financial package; a lender or salesperson should be unbiased and therefore should propose a range of options for any deal, such varying interest rates, deposit amounts and repayment schedules.
  • It was not explained or made clear just who would actually own the car – important as in some cases, the owner is a third-party hire-purchase company.
  • Any associated fines/charges for breaching the agreement were too high and/or unfair.
  • You were charged a disproportionate amount for damage to the vehicle.If the dealer or finance company charged you unacceptable charges for damage to the vehicle, especially if deemed minor, you could argue that they have interpreted the contact unfairly.
  • Other customers took out car finance and subsequently had problems with the vehicle itself. While not a form of mis-selling, you can also complain about this.

More about CarFinance247

Car Finance247 employs over 500 “industry professionals” in their Manchester HQ. They claim to ensure that the customer will always receive the best deal from their panel of lenders, and that they have a network of 4,000 community-rated car dealerships, with over 140,000 cars to choose from.

As with any car finance lender, it is wise to look at their representative examples, to give you an idea of how much the finance will cost you. CarFinance 247 publish this as their representative example:

Borrowing £6,500 over 5 years with a representative APR of 20.7%, and annual rate of 20.7% (fixed) and a 0% deposit, the amount payable would be £168.48 per month, with a total cost of credit being £3608.67 and a total amount repayable of £10,108.67.

CarFinance 247’s website is seeing an unprecedented 95,000 applications for finance per month. This demand is believed to be driven by the wider economic climate, including the COVID post-lockdown hiring boom and rising salaries caused by a shortage of workers after Brexit. There are also indications that consumers are looking to release some of their savings from the lockdown period, with enforced reduced spending on foreign holidays helping to fuel the used car market. To meet these increased consumer requirements, CarFinance 247 is planning on hiring more than 125 extra staff to meet the growing needs of the company. Consumer demand is also being met by the platform’s panel of lenders, who, after experiencing the decline in lending at the height of the pandemic, are understandably eager to resume lending.

Along with complaints of mis-selling, CarFinance 247 has also been hit with complaints about bombarding members of the public with irrelevant and annoying texts – so much so that CarFinance 247 were reprimanded by the Information Commissioner’s Office (ICO) following nearly 1,000 complaints. CarFinance 247 managed to send 65,000 “nuisance” texts to people in just four months! They were given a £30,000 fine for their text message tactics; in a four-month long marketing campaign, some 65,000 unsolicited messages were sent to members of the public with insufficient consent. The law says that organisations must only send marketing text messages to individuals if they have agreed to receive them, except where there is a ‘clearly defined customer relationship’. The ICO said Carfinance247 did not do this, so broke the law. One unsolicited text read: “You have been accepted for Car Finance no upfront costs or credit checks, drive away in a car within 24hrs at www.go-finance.com to stop txt stop.” Just goes to show that making a complaint really is worth it sometimes!

How to check if you've been mis-sold car finance, and how Redbridge Finance could help you get a refund.

So, we know that some people were mis-sold their contracts, either because details of the agreement weren't made clear to them, or because the proper affordability checks weren't carried out. If you feel that either of these issues has affected you, you can complain. It doesn't matter whether you have an ongoing car finance deal or if you've already paid it off, you can still make a complaint/reclaim. If you are struggling/have struggled to make your monthly repayments, then the loan could well be unaffordable. A loan is only “affordable” if you can make the repayments on time – without hardship – and still meet your other commitments. So, if you're struggling to meet your repayments, and you haven't had a significant change in circumstances since you took the loan out, you might have been mis-sold. If you never missed a payment but got into other debt to prioritise your car repayments, then the loan may well have been unaffordable.

One in five PCP customers claim that they cannot afford the final (balloon) payment. This could be because the contract was mis-sold from the beginning, or because the estimated final payment was not adequately explained. This is also grounds for complaint.

Redbridge Finance has helped many customers who feel that they were mis-sold vehicle finance, based on the issues mentioned above; we can investigate the thoroughness of checks, or as the Financial Ombudsman Service puts it, “reasonable and proportionate checks”, to ensure that the borrower was able to make the repayments for the whole duration of the loan. We can represent you and your claim that you were unable to afford the loan and if we do not agree with the lender’s decision (this being a “no” to a refund or compensation, or an offer that we feel is too small), we will then pass your case on to the Financial Ombudsman.

These complaints may take many months. You will have to keep up the loan repayments during this time, or your car may be repossessed.

If you have had problems paying your loan, or you think you have been mis-sold a loan, then you could be entitled to a refund and/or compensation. Equally, if you feel that you have been treated unfairly, for example if your financial circumstances changed and CarFinance247 did not try to help you in any way, contact Redbridge Finance today by going to www.redbridgefinance.co.uk, sign up, and we can assess if you have a claim.