MILLIONS of drivers who took car finance before 2021 could be in line for thousands of pounds in compensation.
A legal action has been lodged against the UK's three biggest car finance providers – Black Horse, MotoNovo and Santander Consumer – claiming customers were overcharged.
It claims anyone who bought their car on finance between October 2015 and January 27, 2021 from one of the three lenders may have been charged too much interest on their loan.
The legal action also claims these lenders earned bigger profits by allowing car dealers to sell finance at higher rates than they could have.
And it alleges that car dealers ramped up interest rates on car finance to earn themselves a fatter commission.
Consumer advocate Doug Taylor and litigation specialist Scott+Scott are leading the claim, which has been filed at the Competition Appeals Tribunal.
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The Sun has contacted Scott+Scott for further information on the case and is waiting for a response.
Santander told The Sun it did not comment on legal claims against it.
A Black Horse spokesman said the lender is "committed to ensuring customers have clear and transparent information".
He added: "New rules were set out for the industry in 2021, which we have implemented."
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A MotoNovo Finance spokesperson said: "We’re aware of a legal claim that has been brought against us and we are preparing our response.
"We won’t be commenting while these legal proceedings are active.”
How do I claim compensation?
The case has been submitted to the court as a "collective class action" so if you are affected, you are automatically included.
The lawyers believe they can get up to £1billion in damages.
If they win, it would see around a million people receive a payout.
However, it could be many years in the future as legal cases such as this can take a long time to resolve.
You don't have to do anything to benefit if the action is successful – you will be contacted by them.
It only affects people who took a car finance loan between October 2015 and January 27, 2021 from one of the three lenders named in the action.
In 2021 the Financial Conduct Authority (FCA) banned this type of commission, so drivers who took car finance from then on aren't affected.
If the claim succeeds everyone who took car finance during this time frame could be entitled to a payout unless they explicitly refuse it.
This is because the claim is known as an opt-out case – so you are automatically included unless you choose not to take part.
What is a class action?
Lawsuits that result in compensation for many people are often referred to as "class action".
You don't need to do anything as you'll automatically be part of it if you're affected.
But there's a long way to go before anyone could see any payout, as these types of cases can take years in the courts.
In England and Wales a Group Litigation Order (GLO) is often used for this kind of lawsuit,
Collective action has been made easier under the UK’s Consumer Rights Act 2015.
It means the courts can treat similar claims as one, rather than having hundreds or even thousands of separate individual claims.
There are a number of stages to bringing this kind of lawsuit, including the courts needing to give permission for a GLO.
Both sides can also appeal decisions at various stages making it a lengthy process with no guarantee of a payout.
Collective actions are rare – there have only been around 100 cases since 2000 according to the HM Courts and Tribunals Service.
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In May last year, a £600million class action claim against BT alleged that elderly and low-income customers were overcharged by the firm.
And in 2021, Mastercard faced the first case of its kind in the UK.
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