Drivers in Britain gearing up for a compensation war have submitted a staggering 1.4million claims after being mis-sold car finance as part of a multi-billion pound loans scandal – as a new map today laid bare the scale of the fiasco.
The news comes after a landmark legal ruling at the Court of Appeal last month in which judges said dealerships had not properly informed drivers over the ‘secret’ commission payments they were getting for putting motorists on finance deals.
The bombshell decision by Britain’s top appeals court has thrown lenders into chaos, and could lead to seismic consequences on a scale not seen since the £50billion PPI scandal of the 2000s.
Currently, compensation payouts are estimated to hit £13billion. However, some experts fear the true scale of the car finance scam could reach an astonishing £30billion, with the fiasco dubbed the UK’s ‘PPI 2.0’.
Now data, exclusively obtained by MailOnline from lawyers at Courmacs Legal, has shone a light on the areas of Britain most impacted by the scandal.
Darren Smith, managing director of Courmacs said there were victims in every part of the UK. ‘This is truly a national scandal which the Finance Conduct Authority has failed to get a grip on,’ he told MailOnline.
‘Consumers were never told about the secret commissions that inflated their costs and we are in the middle of a cost-of-living crisis where many are already struggling. Millions were denied the opportunity to make informed decisions about their finances, and many paid thousands more than necessary.’
Scotland has so far seen the most drivers claiming compensation, with 193,762 people set to take action, according to Courmacs.
The data has been broken down into election constituencies. Of the top 20 areas with the most claimants, Scotland has 18 of them, with the narrow belt between Edinburgh and Glasgow having the highest concentration of claims of anywhere in the UK.
Topping the list was Airdrie and Shotts, about 30 miles west of the Scottish capital of Edinburgh. Some 5,430 motorists have reportedly placed a claim – almost eight per cent of the constituency’s 70,400-strong population.
The North West of England had the second highest number of total claims, with 168,137 people lodging legal action.
Widnes and Halewood, about 10 miles east of Liverpool, was the region’s biggest claims centre, with 3,193 drivers set to take on a lawsuit.
The South East was the third biggest area in the UK, with 155,387 claimants. The constituency of Sittingbourne and Sheppey, in Kent, had the highest individual number, with 2,642 residents lodging claims.
The West Midlands was third, with 125,367 and the East of England had the fourth-highest figure, at 120,319 drivers coming forward. Yorkshire and the Humber was next, with 115,457 motorists set to take legal action.
In Greater London, which was ranked seventh on the list, there were 100,364 claims, with Erith and Thamesmead – which covers Abbey Wood in the east of the city – having the most people coming forward at 2,224.
There were 99,531 claims in the East Midlands, 95,049 in the South West and 69,331 in the North West. In Wales, 77,989 vehicle owners have already lodged legal claims, while in Northern Ireland, the figure is 62,144.
Marcus Johnson, 34, a factory supervisor from Cwmbran in south Wales, bought his £6,500 Suzuki Swift from a dealership in Cardiff in 2017 shortly after passing his driving test
Pictured is Marcus’s metallic blue Suzuki Swift which he bought on finance when he was 27
The deluge of claims came after three motorists, who were mis-sold finance deals, took legal action and exposed the FirstRand Bank lending agreements which included ‘secret’ commission payments to the dealerships.
Among those to claiming was Marcus Johnson, 34, from Cwmbran in south Wales. He bought his £6,500 Suzuki Swift from a dealership in Cardiff in 2017 shortly after passing his driving test
Aged just 27 at the time and earning around £13,000 a year, he couldn’t afford to buy his new run-around outright, so he took out a finance deal with MotoNovo that cost £154 a month over five years, plus a £100 deposit.
The large majority of new cars, and many second-hand ones, are bought with finance agreements, with about two million sold this way each year.
However, what he didn’t realise was his car dealer received a ‘secret’ commission payment of £1,651 – roughly a quarter of the amount he borrowed.
The dealership had an agreement with MotoNovo – which is owned by the South African bank FirstRand – that guaranteed it first refusal on finance. They also had a commission deal with the lender.
But Marcus was never told about this. The first time he heard of the arrangement was from a lawyer after he clicked on a Facebook ad about car finance mis-selling, which later led him to fight his case in court.
He took his lender to county court, hoping to have the commission returned – but his case was merged with two others and elevated to Britain’s top appeal court, with seismic consequences on a scale not seen since the PPI scandal of the 2000s.
‘I had always thought that car dealerships made their money by making a profit on the cars that they sell rather than by arranging finance,’ Marcus said in his witness statement, the BBC reported.
‘I had no idea before then. Commission as part of the industry is not necessarily a bad thing,’ he said. ‘But it was kept out of sight. If they are deceiving customers then, to me, that’s disgusting.’
He lost his initial court case. However, at the higher Court of Appeal, the case was combined with two others, with three judges unanimously ruling in their favour.
The other two car owners involved in legal battle were Andrew Wrench, described as ‘a postman with a penchant for fast cars‘, and Amy Hopcraft, a student nurse.
Postman Andrew Wrench, 60, is one of the unlikely architects of a legal case that has turned the UK’s borrowing industry upside down
Former retail manager Mr Wrench snapped up this special edition Audi TT for his wife in 2015 on finance – unwittingly getting the dealership a commission
Two years later, Mr Wrench snapped up this sleek BMW 3 Series convertible – again netting a dealership a payout because it referred him for finance
The judges’ landmark ruling was a win for the trio, but – more significantly – opened the door for claims from many, many more motorists ‘ripped off’ in the car finance scandal.
At the Court of Appeal, Lady Justice Andrews and Lords Justices Birss and Edis ruled Mr Johnson and his fellow car buyers had not made a truly informed decision on finance because they did not know their dealership was being paid for the deal.
Just like that, the borrowing market imploded: Shares in FirstRand and Close Brothers, the other lender implicated in the judgement, tumbled.
Elsewhere, Lloyds set aside millions for compensation; BMW and Honda halted new car deliveries; other dealerships froze purchases as they hurriedly rewrote credit agreements to mention commission.
‘I never buy cars on finance,’ the 60-year-old told MailOnline. ‘I’ve had Porsches, Mercedes, a Triumph Stag with the V8 three-litre – and I’ve always paid cash.’
The former retail manager, who now delivers parcels for Royal Mail, said he was blown-up by the outcome of the landmark legal ruling.
‘I didn’t expect this impact,’ he said. ‘It’s been a bit of a whirlwind.
‘Did I do it for the money? No. I did it for the principle of it.
‘My wife’s colleagues have cottoned on and see my name, and asked, “Is this your Andy? Do you realise what he’s done to the market?”
‘It’s not me, personally. I haven’t done anything as a vendetta or anything to the market.
‘But the cat’s out the bag and the truth has been found out.’
Mr Wrench is described as a ‘postman with a penchant for fast cars’ in the judgment. On May 23 2015 he snapped up a used Audi TT Quattro Sport – a special edition of the coupe in two-tone red and black paint that can hit 60mph in less than six seconds – for which he put down a £3,000 deposit against the £8,995 price.
Mr Wrench, 60, says he only became aware of the commission handed to each dealership after he studied the paperwork years later
He bought the Audi from Fast Lane Motors in Stoke-on-Trent, putting down a £3,000 deposit and paying the rest on finance
The BMW was sourced from TT Sports and Prestige in Derby – who picked him up from the local train station in the car itself before he drove it away the same day
The dealership, Fast Lane Motors in Stoke, offered him a deal at £175 per month over four years for the remaining £5,000 to pay on the car, which he purchased for his partner Louise shortly after her mother passed away.
‘I just happened to be walking past at the time, saw it, took a picture, went in and paid a small deposit to hold it of £50. I came home, showed her it and her eyes just sort of lit up,’ he recalls.
The sale was ‘quick’, he remembers: ‘The salesman came back with the paperwork and it was quite swift: bang, bang, bang, four signatures required and away you go.’
Less than two years later, he came across a lustrous blue BMW 3 Series hard-top convertible coupe with a throaty 2.5litre engine. This one would be for him.
He contacted the dealership, TT Sports and Prestige, and hopped on the train to Derby on March 13 2017.
The salesman met him at the train station in the car itself – a clever sales pitch, Mr Wrench notes – and he bought the car that day, putting down £1,000 against the £9,750 price and funding the rest of the purchase with another credit agreement.
He remembers: ‘We went back to the place, sat down, chewed over the cod as you do, and then the bottom line, sign here, £220 a month and you can drive it away today. Wow!’
Mr Wrench borrowed the money for the Audi at an APR of 19.3 per cent and the BMW at a APR of 10.2 per cent. Both were four-year agreements.
In each cases, the court said Mr Wrench had been told by the dealerships they would get him ‘the best rate from their panel of lenders’.
But in reality, Mr Wrench had unknowingly helped the dealers to make an extra win on his car sale when he agreed to finance the purchases through MotoNovo – which lent £3.9billion to Brits in the year to June 2024.
Fast Lane was paid £179.85 for the Audi loan, while TT Sports and Prestige was paid a total of £408.98 for the BMW. Of that, £299.60 was ‘difference in charge’ commission – a now outlawed bonus that was directly linked to the interest rate.
The postman was completely unaware he was doing the dealerships an extra favour. He admits that he did not read the lengthy terms of the finance agreements from beginning to end – because, frankly, who does?
MotoNovo Finance paid Fast Lane nearly £180 in extra commission for the Audi’s sale
TT Sports and Prestige, meanwhile, was paid over £400 – of which nearly £300 was directly linked to the interest rate on Mr Wrench’s finance agreement
The scandal has been compared to the mis-selling of payment protection insurance (PPI), which cost banks billions. Experts say this could do the same to lenders (stock image)
‘If anybody says different, they’d be lying,’ he says. ‘There are tens of thousands of people who do this every year.’
He says he has read comments on news articles about the ruling that call him an ‘idiot’ and a ‘clown’ for not reading the agreement from cover to cover.
But the Court of Appeal actually sides with him on this – noting that lenders are almost certainly aware there is a ‘negligible’ chance of consumers reading the terms from top to bottom.
In fact, the judges said, FirstRand actively counted on it, hiding the reference to a commission in a ‘carefully concealed sub-clause’ of the finance agreement under a heading called ‘General’ – a ruse they called ‘an attempt to divert attention from it’.
It was only when, last year, he read over the contract for a Range Rover he bought on finance in 2019 that he spotted a reference to commission payments. He then pulled out the agreements for the BMW and the Audi – and realised he had been had.
With a legal team including Jamal Ahmed, of Bradford’s Cooper Hall Solicitors, barrister Greg Lawton, and Consumer Rights Solicitors, he set his legal action in motion.
‘I’ve always thought, having owned 30-odd cars over 40-odd years, is that when you buy a car, whether it’s a dealership or a private independent dealer, those cars are on the forecourt for a markup,’ Mr Wrench said.
‘It was about trust. I’m a very trusting person. But dealerships push the finance because it’s better for them than money in the bank.
‘I had always thought up to this point the interest MotoNovo makes was sufficient for them and the markup for the dealership goes in their bank.
‘But knowing this now leaves a bitter taste in my mouth.’
The Royal Courts of Justice, in London, where the Court of Appeal sits. It has moved to block any further appeals against its decision by FirstRand and Close Brothers
Shares in Close Brothers – one of the firms named in the bombshell case – tumbled after the judgment was released and it went on to suspend new car loans
MotoNovo also suspended new car loans – but has since resumed giving them out after considering the judgment
Mr Smith, boss of Courmacs Legal Ltd said his firm was dealing with more than 1.4 million motor finance claims.
Individual drivers can submit multiple claims, if they have a taken out finances deals in different cars.
Courmacs said victims could be in line for large cash payouts, with the average compensation award for cars worth less than £10,000 hitting £3,772 in court, while those worth between £10,000-£30,000 could get up to £6,437 in compensation. For cars worth over £30,000, the firm says drivers could get up to £12,510 in compensation if they take their case to court.
Mr Smith added: ‘There is now a significant difference between the amount of money a court is likely to award a victim of mis-sold motor finance and the amount of money that is likely to be awarded as calculated by the Financial Ombudsman service.
‘As a firm of solicitors, Courmacs Legal can claim up to three times as much on behalf of a client than if they used a Claims Management Company.’
It comes as MPs prepare to grill the head of Britain’s finance watchdog over the scandal.
In a damning report last month, the Finance Conduct Authority ( FCA ) was found to be ‘incompetent’ and ‘dishonest’ was the body’s handling of the motor finance scandal continues to be dissected.
A cross-party parliamentary group made up of 30 MPs and 14 peers has been investigating the FCA for three years, before releasing the verdict of their probe on November 28.
Some 175 individuals, including ex-employees, scam victims and whistleblowers were spoken to, with the report concluding the financial regulator was ‘not fit for purpose’.
‘The FCA is seen as incompetent at best, dishonest at worst. Its actions are slow and inadequate, its leaders opaque and unaccountable,’ the report read.
‘Issues are rooted in the way the organisation is being led, conflicts of interest and the culture that the successive leadership teams have created.’
Meanwhile, the shockwaves from the legal ruling continue to wreak havoc on Britain’s motoring lenders.
Close Brothers has suspended new car loans. Lloyds’ Black Horse lending division has stymied commission payments. MotoNovo, meanwhile, is back in business in giving out loans.
For Andrew Wrench, he just wants car dealers to clean their act up: that when they tell customers they’ll work to get them the ‘best deal’, they mean it.
Mr Wrench continues: ‘When I started this I had thought: “Am I going to lose?” Will they say, go away little postie from Stoke-on-Trent, and the other two, a student nurse and a supervisor? We’re all just normal human beings that paid our way in life.
‘It’s very sad to know that for many, many years this has been going on – but now it’s going to stop, and I’ve been one of those parties that have been responsible for that.