Stellantis UK Faces £37 Million Hit from Car Finance Mis-Selling Scandal
Overview
Stellantis UK, the British arm of the global automotive giant behind brands like Vauxhall, Peugeot, Citroën, Fiat, and Jeep, has set aside £37 million to address potential liabilities arising from a widespread car finance mis-selling scandal. This move comes in response to a Financial Conduct Authority (FCA) investigation into the use of discretionary commission arrangements (DCAs) in car finance deals, which were banned in 2021. The FCA is preparing a compensation scheme that could cost the industry between £9 billion and £18 billion, potentially affecting up to 14.6 million car finance agreements since 2007. (The Times)
Background
Discretionary commission arrangements allowed car dealers to set customer interest rates and receive higher commissions for higher rates, creating a conflict of interest and leading to higher costs for consumers. The FCA banned this practice in 2021 and has since launched a review to determine the extent of the mis-selling and to develop a compensation scheme. A recent Supreme Court ruling upheld a case involving non-discretionary commissions, indicating that compensation may extend beyond discretionary arrangements. (The Times)
Financial Implications for Stellantis
The £37 million provision by Stellantis UK is part of a broader trend, with other major lenders also setting aside funds to cover potential compensation costs. For instance, Lloyds Banking Group has earmarked £1.15 billion, Santander UK £295 million, and BMW’s UK finance division £70 million. These provisions reflect the industry’s efforts to prepare for the anticipated compensation scheme, which is expected to be one of the largest financial redress programs in the UK’s history. (The Times)
Consumer Impact
Approximately 14.6 million car finance agreements are under review, with many consumers likely to be owed compensation due to improperly disclosed commissions. The average refund for a discretionary commission claim is estimated to be around £950 per agreement. The FCA has assured that its compensation scheme will be free to use, warning consumers not to hand over part of their compensation to claims management companies or lawyers. (LawPlus⁺ Solicitors)
Industry Response
The car finance mis-selling scandal has prompted significant changes in the industry. Many lenders are reviewing their practices and implementing measures to ensure compliance with FCA regulations. The FCA has extended the deadline for lenders to respond to customer complaints until December 2025, aiming to ensure consistent consumer treatment and prevent disorderly outcomes. (The Guardian)
Case Studies and Consumer Experiences
1. Ms. C’s Complaint:
In November 2021, Ms. C entered into a 48-month conditional sale agreement with Stellantis Financial Services UK for a new car. She paid a deposit of £993 and was required to pay monthly instalments of £255, with a final payment of £5,475 should she decide to keep the car. Ms. C later complained that the car was not of satisfactory quality, leading to an investigation by the Financial Ombudsman Service. (Financial Ombudsman)
2. Ms. W’s Hire Purchase Agreement:
In September 2022, Ms. W entered into a hire purchase agreement with Stellantis Financial Services UK for a new car. She paid an advance payment of £1,000, and the agreement was for £34,475 over 48 months, with 47 monthly payments of £563.31 and a final payment of £16,709. Ms. W later complained that the car was of unsatisfactory quality, leading to an investigation by the Financial Ombudsman Service. (Financial Ombudsman)
3. Repossession and Customer Treatment:
In March 2025, a customer complained about Stellantis Financial Services UK’s handling of a vehicle repossession. The customer alleged that despite winning a court case against the Return of Goods Order, Stellantis refused to return the vehicle. Additionally, the customer reported aggressive behavior from the agent, including derogatory remarks and attempts to coerce the customer into handing over house keys. This case highlights concerns regarding the treatment of vulnerable customers and adherence to FCA rules. (ADVICIFAS)
Industry Response and Regulatory Actions
1. FCA’s £1 Million Advertising Campaign:
The FCA launched a £1 million advertising campaign aimed at informing drivers that they can apply for compensation over a car loan commission scandal without using paid legal services. The campaign involves online influencers and radio ads, stressing that applicants can file complaints for free rather than giving up to 30% of their payout to claims firms. However, this initiative has faced resistance from claims management companies and law firms, who argue that it undermines legal support for consumers, especially vulnerable ones. (The Guardian)
2. FCA’s Stance on Lost Data:
The FCA has warned car finance firms against claiming to have lost customer records about mis-sold car loans. The regulator stated that it will challenge such claims to ensure consumers receive their fair share of a potential £18 billion compensation pot. This action aims to prevent lenders from avoiding accountability by citing data loss. (The Guardian)
3. Supreme Court Ruling and Compensation Scope:
A recent Supreme Court ruling upheld a case involving non-discretionary commissions, indicating that compensation may extend beyond discretionary arrangements. This decision has implications for the scope of the FCA’s compensation scheme, potentially broadening the number of affected consumers and the amount of compensation to be paid. (The Times)
Conclusion
The £37 million provision by Stellantis UK underscores the significant financial impact of the car finance mis-selling scandal. As the FCA’s compensation scheme takes shape, it is expected to provide redress to millions of consumers who were affected by improper commission arrangements. The industry’s response to this issue will likely lead to more transparent and consumer-friendly practices in the future.