Car Finance Claims: What You Need to Know

What the car finance issue is about

When most people buy a car on finance, they arrange it through the dealer rather than going straight to a lender. For years, many dealers earned a commission from the lender for arranging that finance, and in a lot of cases the size of that commission was linked to the interest rate you were given. That created an incentive for the dealer to set a higher rate, because a higher rate meant more commission, and the customer was usually never told. These arrangements, often called discretionary commission arrangements, were banned by the Financial Conduct Authority in 2021. The concern now is about agreements taken out before that ban, where customers may have paid more than they should have without ever knowing commission was involved.

The FCA review and why it matters

The Financial Conduct Authority, which regulates lenders in the UK, is carrying out a review into how motor finance commission was handled in the years before the 2021 ban. The review is looking at whether customers were treated fairly and whether they are owed money where commission was not properly disclosed. This has become one of the largest consumer finance issues in recent years, and lenders have been setting aside money in case they need to pay customers back. The situation is still developing, and the exact way any redress will work is being decided, so it is worth keeping an eye on official updates rather than acting on rumour.

[FLAG FOR BUILD: confirm the current status line of the FCA motor finance review on fca.org.uk before publish, and update only this paragraph if the position has moved. Do not add specific dates or scheme details that are not confirmed.]

Were you affected?

You may be affected if you bought a vehicle using finance such as a personal contract purchase, hire purchase, or a conditional sale agreement, and the agreement was arranged through a dealer or broker rather than directly with a bank. The issue mainly concerns agreements taken out in the years before the 2021 ban on discretionary commission. It can apply to cars, and in many cases to vans, motorbikes, and other vehicles bought the same way. It does not matter whether you have finished paying the agreement off, and it can still apply if the car has since been returned or sold. If you are not sure whether commission applied to your deal, you have the right to ask the lender, as explained below.

How to check and complain, for free

You do not need to pay anyone to make a complaint. The process is free if you do it yourself, and it is straightforward. First, gather what you can about the agreement, such as the lender's name, the dealer, the rough dates, and the registration if you have it. If you do not have the paperwork, you can ask the lender for a copy of your agreement and for details of any commission that was paid. Second, complain directly to the lender, which is the finance company named on the agreement, not the dealer, and ask them to look at whether you were treated fairly on commission. Keep your complaint factual and in writing so you have a record. Third, if the lender rejects your complaint or you are unhappy with their response, you can escalate the case to the Financial Ombudsman Service, which is free and independent and can rule on whether you were treated fairly.

Why you should not use a claims company

You will see adverts from claims management companies and law firms offering to handle a car finance claim for you. They are allowed to do this, but they typically take a significant cut of any money you receive, often around a quarter or more once fees and any tax on the fee are included. Because you can complain to the lender and escalate to the Financial Ombudsman Service yourself, for free, using a claims company usually just means giving away part of any payout for work you could do in an afternoon. There is also no evidence that a claims company gets you a better outcome than complaining yourself. If you do decide to use one, read the fee terms carefully so you know exactly what you would keep.

What any payout might look like

It is important to be realistic and patient. No one can promise you will receive anything, because that depends on the facts of your agreement and on how the review and any redress are finally settled. Where money is owed, redress in cases like this usually aims to put you back in the position you would have been in, which can mean refunding the extra interest you were charged because of the commission, plus an element of interest on top to reflect the time you were out of pocket. The amount varies a great deal from one agreement to another, and small, short agreements will tend to involve smaller sums than large, long ones. Treat any figure you see advertised as marketing rather than a quote, and wait for your lender or the Ombudsman to assess your individual case.

How to estimate and protect yourself

While you wait, you can get a rough sense of the scale of a possible settlement on an agreement using our car finance claim calculator at /tools/car-finance-claim-calculator/, remembering that it is only an indication and not a promise of redress. Be cautious of anyone who contacts you out of the blue about a car finance claim, especially by text or social media, as scammers are using this issue to try to get personal details or upfront fees. A genuine complaint never requires an upfront payment, and you should never share banking passwords or one-time codes. If you want to understand the finance products themselves, our guide to PCP and HP car finance at /blog/car-finance-pcp-uk/ explains how the agreements are structured.