Islanders who suspect they may have been mis-sold car finance are being encouraged to speak up, following a major UK scandal that could have implications for Jersey consumers.
The Jersey Consumer Council has launched an investigation into the potential impact of discretionary commission arrangements — a practice where car dealers or brokers could adjust interest rates to increase their own commission.
This practice has led to widespread legal action in the UK and prompted the Financial Conduct Authority (FCA) to announce an industry-wide compensation scheme for affected motorists.
A discretionary commission arrangement is when a lender (finance company) has allowed the car dealer or broker to set the lending interest rate within a certain range, or the dealer's commission rate has been linked to the interest rate, resulting in high commission if the interest rate is high.
So, if the dealer raised your interest rate above the lender's base rate they earned more money. This has created a conflict of interest because dealers had an incentive to make your loan more expensive.
Local impact
Our Chairman, Carl Walker, has written to over a dozen finance firms operating in Jersey to assess how many Islanders may have been affected and to explore possible compensation routes. You can read the letter here.
He said: “We know this is going to be a long and complicated process, but it felt like the time was right to get the ball rolling in Jersey and to see to what extent these commission practices have been used locally.”
The Council is currently gathering information to determine the level of exposure for Jersey consumers and is urging anyone who financed a vehicle locally to come forward if they believe they may have been mis-sold it.
Look out for further updates coming soon on how to proceed if you think that this is something that might apply to you.
Douglas Melville, Chief Executive of the Channel Islands Financial Ombudsman, has confirmed that his office is aware of the situation and is able to assist.
"If local residents bought a car on financing in the UK, then the developments in the UK are highly relevant to them,” Mr Melville told the Jersey Evening Post.
“If they have bought a car on financing in Jersey or Guernsey, it falls into our remit to provide compensation if we think it’s warranted, and we would encourage any consumers that have those issues to contact our office.”
What can you do?
If you believe you may have been affected by discretionary commission arrangements in your car finance agreement, the Jersey Consumer Council recommends:
- Review your car finance documents.
- Speak to your bank about getting a record of your loan payments.
- Contact your lender or broker to ask whether discretionary commission was used.
- Reach out to the Channel Islands Financial Ombudsman if you feel you were mis-sold or treated unfairly — email enquiries@ci-fo.org
- Stay informed by following updates from the Jersey Consumer Council. This is an evolving issue, and the Council is committed to ensuring that Jersey consumers remained informed about their options going forward.
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