Legal firms target car dealers over ‘PPI-style mis-selling’ of leases

Specialist legal firms are targeting car dealers with a wave of mis-selling claims, stoking fears that the boom in leasing could end in a costly scandal.

So-called claims management firms, which helped extract £50bn in compensation from the financial services industry over payment protection insurance (PPI) are now turning their attention to Britain’s £75bn motor finance sector, which covers 6.5m vehicles.

Nona Bowkis, solicitor at motor trade law specialist Lawgistics, said: “We are seeing legal letters to car dealers from claims management companies saying their clients were not told by dealers they earned commission from arranging finance on car sales. You would expect consumers to have it in key facts documents stating that they were making a commission.”

Ms Bowkis said complaints are mainly around alleged breaches of the Financial Conduct Authority’s consumer credit source book rules. These require that, if sales staff are acting as finance brokers, they must tell customers if they are being paid for doing so, how much they are getting, if the buyers asks, and that the answer is “clear”.

A particular concern appears to be “Difference in Charges” deals, where sales staff can earn higher commission by offering consumers less beneficial financing arrangements.

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