The financial watchdog has announced that it is investigating the car loans market to see if commission payments to brokers were too high. If the Financial Conduct Authority (FCA) finds against the brokers, it could trigger payouts to potentially millions of car buyers.
What car finance is the FCA looking at?
The loans in question were taken out by people buying new and secondhand cars, probably in the form of hire purchase plans or personal contract purchase (PCP) plans – both of which involve making repayments over a long period.
In recent years PCPs have been used by about eight in 10 new car buyers. They are also offered by big secondhand dealers, including those online.
When a car buyer uses a PCP they pay a deposit and take out a loan for a set period – maybe three or four years. The loan is not for the price of the car, but for how much it will depreciate during the period.
During that time they make monthly repayments and at the end of the loan period are given the option of making a final, “balloon”, payment to own the car, or handing it back and starting a new plan.
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So if, for example, the new car is advertised at £20,000 and the dealer judges it will be worth £12,000 after three years and the buyer pays a deposit of £2,000, they will take a loan for £6,000 over the three-year period.
The FCA is looking at finance plans used to buy a car before 28 January 2021.
Personal contract hire (PCH) plans are not affected.
What are the FCA’s concerns?
Overcharging, essentially.
People buying a car through a plan would typically use an intermediary – for example, the dealer – to arrange the finance. Before January 2021 some of the lenders providing the finance used to allow these middlemen, referred to as brokers, to adjust the interest rates they charged customers.
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Some brokers had “discretionary commission arrangements”, which meant they were paid more if the interest rate was higher, and so they had an incentive to make the loan more expensive for the customer.
What has prompted the investigation?
Customers who took out loans before 2021 have been complaining to lenders and brokers, encouraged by claims management firms. Most have been turned away. About 10,000 have taken their complaints to the Financial Ombudsman Service, the organisation that settles disputes between financial firms and consumers.
It has decided on two cases, and in both found that the way the commission arrangement between the lender and the car dealer worked was unfair to the consumer.
The FCA is clearly concerned that these are not isolated incidents.
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How much has been overpaid?
It will vary from case to case as it seems some lenders gave brokers a wide choice of interest rates to apply.
In one of the ombudsman cases, the buyer was found to have been charged an interest rate of 5.5% when she would have paid 2.9% without the broker’s commission. In the second, the driver paid 4.67% when without commission the rate was 2.68%.
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To give you an idea, on a £5,000 loan arranged over three years the difference in cost between rates of 2.9% and 5.5% is about £200.
Will I get a refund?
Not if you bought your car on or after 28 January 2021.
Otherwise you might. The FCA says that if it does find “widespread misconduct” and that consumers have lost out it will work out how to compensate people – it could be that it orders a return of whatever extra interest is calculated to have been paid over the loan period.
That is some way off at the moment. In the meantime, you do not need to do anything – in fact, complaints have been paused so nothing will be done until the end of the process.
A claims management company has called. Shall I use it?
No. You will have to pay a fee if you use a company to make your claim – it typically comes out of the payout.
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If you haven’t made a complaint about this issue previously, you could wait to see what happens to the FCA investigation. If it finds bad practice it may order brokers to proactively contact customers who were affected to arrange compensation.
But it could tell them to reimburse the customers who have complained – and there is a time limit on complaints. Generally, you need to complain to your provider within six years of a problem happening or within three years of you becoming aware that you had cause to complain. If you think you could be running out of time, you should consider complaining to your provider now.
For anyone who has complained to a lender or broker and had that dismissed between 12 July 2023 and 10 January 2024, the FCA has extended the period in which you can take your complaint to the Financial Ombudsman from six to 15 months.
Consumer confidence has plunged among traditionally optimistic younger adults amid fears for their personal finances and the wider economy, figures show.
GfK’s long-running Consumer Confidence Index remained unchanged at an overall score of minus 23 in June.
However, the analyst said this was was “misleading as, beneath the surface, there are new signs that confidence is weakening”.
Source: GfK
Neil Bellamy, consumer insights director at GfK, said: “The biggest fall this month is among those aged 16 to 29, traditionally one of the most optimistic groups.
“Here confidence has dropped 11 points over the past month to minus two, the lowest level seen for two years, driven by large falls in views on both their own personal finances and the wider economy.
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“More broadly, there are now no demographic groups with a positive confidence score, including higher-income households earning £50,000 or more, who have slipped back into negative territory as of June.
“Confidence remains subdued and vulnerable to further economic or political uncertainty.”
Sourve: GfK
Overall, confidence in personal finances over the coming year remained flat at minus two, four points lower than this time last year.
The measures of both personal finances and the economy over the previous 12 months were both slightly down, by two points and three points respectively, “reflecting the sense that things have been extremely tough over the last year for so many”, GfK said.
The only measure to increase was expectations for the wider economy over the next 12 months, up two points to minus 36 but still eight points below this time last year.
The major purchase index, an indicator of confidence in buying big ticket items, remained at minus 20, four points lower than June last year.
“Ships of the World, start your engines. Let the oil flow!” said Donald Trump on social media after he announced the signing of an interim peace deal with Iran on Sunday. Under the agreement – which Iran acknowledged included a 60-day negotiating period for a final deal – the president said that following retrieval of mines, there would be a “toll free opening” of the Strait of Hormuz.
But many of the finer details remain “unclear”, said The Guardian. There are questions over the “exact timing of the reopening of the maritime route, who will oversee safe passage and whether any conditions will be applied”.
Financial markets have welcomed the announcement, but further volatility could yet hit people’s pockets.
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Have oil prices changed?
The price of oil fell to about $83 (£62) per barrel following Sunday’s announcement, its “lowest since the early days of the war”. Then on Tuesday it dipped below $80. In February, before the first missiles struck Iran, each barrel cost around $73. The price peaked at around $120 at the height of the conflict.
Prices are expected to fall in the wake of a prolonged ceasefire, and there are “real grounds for optimism”, said Politico. Damage to oil-specific infrastructure has been “limited”, meaning it could take “as little as six weeks to resume outflows”.
“So that’s the energy crisis sorted, right?” Not so fast.” A combination of damage to wider infrastructure and the continued closure of the Strait of Hormuz has meant roughly 12 million fewer barrels of oil have been produced each day. And they “won’t magically reappear on the market even if the pact holds”.
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Will this continue?
The “first big test” of the deal will be whether shipping companies will have enough “confidence” to return the use of the strait to pre-war levels, said The New York Times. If successful, this will free the 250 tankers and 330 cargo ships trapped in the Gulf, according to the BBC, and transport oil around the world. Oil and gas producers in the Gulf nations would then need to re-establish “wells, refineries and other infrastructure”.
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Even if all of that were to materialise, European and Asian countries who have historically depended on oil from the region “will face a long wait”. Processing oil takes considerable time. “It is unlikely that the prices of gasoline, diesel and other fuels will return to pre-war levels anytime soon.”
What about inflation?
Despite air fares “surging” and fuel costs “tipping higher”, UK inflation remained at 2.8% in May, said The Independent. This was a “surprise” to economists, who had widely predicted a rise to 3% and “perhaps even beyond” due in part to the war in Iran.
Remaining at this level could imply that the “cost-of-living squeeze will not play out as badly as had been anticipated” earlier this year, even if the “Iran war sent energy costs spiralling”. However, prices are set to rise again later in 2026, leaving savers to make sure their investments are earning an interest rate “well above the rate of inflation”.
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What does this mean for consumers?
Food prices in the UK look to be rising more slowly. Should the Strait of Hormuz open freely, fertiliser, which has “soared in costs” and put pressure on farmers, could fall substantially, said the BBC. Jet fuel has already seen a “small fall in price”, with Northwest Europe jet fuel trading at $1,033 (£780) per tonne, compared with $831 pre-conflict and around $1,840 at its peak.
How will businesses be affected?
Beneath the “encouraging headlines” about inflation control, there is a “hidden crisis for businesses”, said The Telegraph. The Iran war triggered one of the largest energy shocks in history, meaning businesses were “swallowing soaring costs to spare shoppers”.
“Input rises” for producers climbed by “8.7% year on year in May”, larger than the 7.9% in April and the highest in more than three years. On the bright side, this means the economy may avoid a dreaded “wage-price spiral”, but conversely lower margins could lead to increased pressure on the employment market.
Hong Kong graduates believe the city’s finance industry is its most attractive and stable sector, making them more optimistic about career opportunities than their global peers, according to a study by the CFA Institute, which trains investment managers.
The US-based institute’s “2026 Graduate Outlook Survey”, released on Wednesday, found that 71 per cent of Hong Kong graduates rated their career prospects between eight and 10 out of 10. The global average for that level of optimism was 59 per cent.
The graduates’ view of careers in finance reflected “both the sector’s resilience and Hong Kong’s continued strength as an international financial centre, which ranks third worldwide and first in Asia-Pacific”, the institute said in a statement.
The findings also indicated that young people were confident about Hong Kong’s role as an international financial centre, resilient amid global uncertainties, and strategically focused on improving skills, it said.
That confidence was “deeply grounded”, it said, with nearly 90 per cent believing they had the skills to succeed and clearly understood what employers were looking for, notwithstanding the wider adoption of artificial intelligence in the city.
“Rather than viewing AI as a threat, 38 per cent of Hong Kong graduates believe it has no negative impact on their job hunting, and 37 per cent believe it makes securing a job easier,” the institute said. “Three quarters are already actively using AI tools in their job applications, demonstrating a proactive, tool-first mindset.”
