By Christopher Smart
One of the UK’s biggest consumer finance scandals in recent decades could result in billions of pounds being paid in compensation to motorists – including British expatriates now living in Cyprus.
The controversy centres on car finance agreements arranged in the United Kingdom between 2007 and January 2021, during which many dealerships received commissions from lenders without customers fully understanding how these payments could affect the interest rates they were charged.
For the thousands of British citizens who have relocated to Cyprus over the years, this development raises an important question: Could you still be entitled to compensation even if you no longer live in the UK?
The answer appears to be yes.
What is the UK car finance scandal?
The issue relates primarily to so-called Discretionary Commission Arrangements (DCAs).
Under these arrangements, lenders allowed car dealers to increase the interest rate offered to customers above a minimum level. In return, dealers received higher commission payments.
This meant that some customers may have paid more for their car finance than was necessary, without realising that dealers had a financial incentive to charge higher rates.
The UK’s Financial Conduct Authority (FCA) banned these commission structures in January 2021 and subsequently launched a major review into historical motor finance agreements.
The regulator is now working towards a compensation scheme for consumers who may have been treated unfairly.
Who could be eligible?
You may potentially qualify for compensation if:
- You took out car finance in the UK between 2007 and January 2021;
- The finance agreement was arranged through a car dealership;
- The agreement was a Hire Purchase (HP) or Personal Contract Purchase (PCP)arrangement;
- You have since moved to Cyprus or another country outside the UK.
Importantly, living abroad does not automatically disqualify you from claiming compensation. What matters is that the original finance agreement was entered into in the UK.
This means that British retirees, expatriates and former UK residents now living in Cyprus may still be entitled to compensation.
How much compensation could people receive?
There is currently no fixed amount of compensation.
Industry estimates suggest that average payouts could amount to several hundred pounds per agreement, although the final amount will depend on individual circumstances, including the size of the loan and the commission arrangements involved.
Given that millions of agreements are under review, the total compensation bill for the industry could run into billions of pounds.
How can expats in Cyprus make a claim?
The process is relatively straightforward.
1. Locate your documents
Gather any paperwork relating to the vehicle purchase, including:
- Car finance agreements;
- Monthly payment statements;
- Correspondence from the lender;
- Vehicle purchase invoices.
If you no longer have these documents, contact the lender directly to request copies.
2. Identify your lender
Common UK motor finance providers include:
- Black Horse;
- Santander Consumer Finance;
- Close Brothers Motor Finance;
- MotoNovo Finance;
- BMW Financial Services;
- Volkswagen Financial Services;
- Mercedes-Benz Financial Services;
- Barclays Partner Finance.
3. Submit a complaint directly to the lender
The FCA recommends that consumers contact lenders directly rather than immediately using claims management companies.
Many lenders now have dedicated online complaint forms specifically for motor finance commission complaints.
When contacting your lender, explain that you believe your agreement may have involved undisclosed commission arrangements and request that your case be reviewed as part of the FCA’s ongoing investigation.
4. Be cautious of claims companies
A number of claims management firms are actively advertising services relating to motor finance compensation.
However, many charge fees of 25% to 40% of any compensation awarded, plus VAT.
Consumers can generally submit complaints themselves free of charge.
Useful links
For official updates and information, consumers can visit the FCA’s dedicated page here.
Financial Conduct Authority – Car Finance Complaints
Consumers may also wish to contact their lender directly through the following pages:
- Black Horse: https://www.blackhorse.co.uk/help-centre/car-finance-commission-complaints
- Santander Consumer Finance: https://www.santanderconsumer.co.uk/contact-us/car-finance-commission-complaints
- Close Brothers Motor Finance: https://www.closemotorfinance.co.uk/commission-complaints
- MotoNovo Finance: https://www.motonovofinance.com/commission-complaints
What happens next?
The FCA continues to develop a formal compensation framework, although ongoing legal proceedings involving several lenders mean that the timeline remains uncertain.
Consumers who believe they may have been affected are encouraged to register complaints with their lenders now, even if final compensation arrangements have yet to be confirmed.
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