It has opened up the issue for islanders by making a template letter for people to set the ball rolling on potential claims.
A review carried out by the UK’s Financial Conduct Authority last year found that many motorists in the UK may have been mis-sold car finance and could be eligible for compensation. It emerged that in some cases there were particularly large lender-to-dealer commissions.
JCC chairman Carl Walker wrote to more than a dozen firms which offer car loans as part of its investigation into how much impact this had had in the islands.
‘From the initial reaction and feedback we’ve had, we are anticipating that this could be quite significant across the Channel Islands,’ he said.
‘We’ve already been contacted by a number of consumers in Guernsey regarding this matter so I suspect it will be very welcome news to them that the hard work has been done and the templates are ready for them to use.
‘In order for the complaints journey to begin it needs to start with consumers contacting the car dealerships and the finance firms.
‘Once we see how they respond, that will determine the next moves, which will probably be for people to take their responses – or lack of – to the Channel Islands Financial Ombudsman for him to consider his next steps.’
The developments follow the emergence of an industry-wide scandal that has been the subject of UK Supreme Court proceedings, relating to the use of discretionary commission arrangements where the broker – often a car dealer – could adjust the interest rate being offered to obtain a higher commission.
An extensive review of motor finance agreements by the UK’s Financial Conduct Authority found ‘widespread failures to adequately disclose the existence and nature of commission and contractual ties between lenders and brokers’. It said that many consumers may have overpaid as a result.
Mr Walker said that the council thought it was an obvious move to look at the implications for local customers.
Consumers can make a claim for any car finance taken out after 2010.
While each case will depend on its own facts, the key issue is transparency. Borrowers should have been clearly told whether commission was being paid, how it was calculated and whether it could affect the cost of their borrowing.
Where this did not happen, customers may have been placed at a disadvantage and may not have been offered the most competitive finance available at the time.
If commission arrangements did apply and were not disclosed, the letters allow customers to raise a formal complaint. If firms are unable to confirm the position, the correspondence can also operate as a data subject access request, requiring companies to provide relevant records under Jersey’s data protection law.
The letter template it has made available can be sent to car dealers and finance companies and should help customers find out if commission was paid on their car finance and if this might have influenced the interest rate or terms of the loan.
People do not need to be certain that they were affected before writing, since the aim is to establish the facts.
These were important first steps, Mr Walker said, but he warned that this could be a long process.
To download the letters go to the JCC website.