Car Finance Mis-selling Claims: The PCP & HP Commission Scandal Explained (2026)

Last updated: June 2026 — this is an evolving regulatory matter. Nothing in this article constitutes legal or financial advice. Always seek independent professional advice for your own situation.

If you took out a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement through a car dealer or broker before January 2021, there is a real possibility that you were charged a higher interest rate than necessary — without being told why. The reason? A commission arrangement that gave dealers a direct financial incentive to set your rate as high as you would accept.

The Financial Conduct Authority (FCA) has been investigating this practice for several years, and the legal and regulatory picture is still developing as of mid-2026. This guide explains what happened, where things stand, who may be affected, and what steps you could consider taking.

What Were Discretionary Commission Arrangements?

For many years, motor finance lenders allowed dealers and credit brokers to set — or influence — the interest rate on a finance agreement within a permitted range. The dealer could choose any rate between a floor and a ceiling set by the lender. Critically, the higher the rate the dealer set, the larger the commission payment the dealer received from the lender.

These arrangements are known as discretionary commission arrangements (DCAs).

How the incentive worked in practice

• A lender might allow rates between 5% and 12% APR on a given product.
• The dealer chose where in that range to pitch the offer to you.
• Setting the rate at 10% rather than 6% earned the dealer substantially more commission.
• You had no way of knowing this was happening, because commission arrangements were rarely disclosed in any meaningful way.

The FCA's own research, published in 2019, found that DCAs were widespread across the motor finance market and that consumers were paying more as a direct result. For a typical four-year PCP deal on a mid-range car, the FCA estimated the arrangement could add hundreds of pounds to the total cost of borrowing.

The FCA Ban and What Happened Next

On 28 January 2021, the FCA banned discretionary commission arrangements in motor finance. From that date, lenders could no longer use commission structures that gave dealers a financial incentive to increase interest rates.

However, the ban only applied from that date forward. Millions of finance agreements signed before January 2021 — some going back ten years or more — were unaffected by the ban itself. The question of whether consumers who paid inflated rates under those older agreements could obtain redress was left unresolved.

The FCA review (2024 onwards)

In January 2024, following a significant ruling by the Financial Ombudsman Service (FOS) that several lenders had acted unfairly, the FCA announced a formal review of historical motor finance commission complaints. The regulator required lenders to pause the eight-week deadline for responding to certain complaints while it assessed the scale of potential redress.

In 2024 and into 2025, the Court of Appeal handed down judgments in related cases — most notably Johnson v FirstRand Bank and linked appeals — finding that dealers acting as credit brokers owed a duty of disclosure to consumers and that non-disclosure of commission could render an agreement challengeable. The Supreme Court was due to hear further appeals; as of the date of this article, final clarity from the highest court has not yet been provided, and the FCA's review timeline continues to develop.

Who Is Likely to Be Affected?

You may have a potential claim worth investigating if you meet the following broad criteria. This is not a definitive eligibility test — only a review of your specific agreement can determine that.

The FCA has estimated that DCAs were used across a large proportion of motor finance agreements in the period roughly 2007 to 2021. If you have had a car on PCP or HP during those years and arranged it through a dealership, it is reasonable to investigate further. You can check your agreement with our free car finance claim checker to get a clearer picture of whether your deal may have involved a DCA.

The Legal Basis for Complaints

Complaints about pre-2021 car finance commission arrangements can draw on several overlapping legal and regulatory frameworks.

Unfair relationships under s.140A Consumer Credit Act 1974

Section 140A of the Consumer Credit Act 1974 allows a court (or the Financial Ombudsman Service, which applies similar principles) to find that the relationship between a creditor and a debtor was "unfair" and to grant relief. Courts can look at anything relevant to the relationship, including the conduct of an associated party such as a dealer acting as a credit broker.

The Supreme Court's jurisprudence in this area has been developing. The key question is whether the failure to disclose a commission — particularly one that incentivised the dealer to charge you more — made the relationship unfair. The Court of Appeal decisions in the 2024 cases found that it could, in circumstances where the broker had a duty of disclosure and breached it.

FCA rules on disclosure and conflicts of interest

The FCA's Consumer Credit sourcebook (CONC) required credit brokers to disclose the existence and nature of any commission that could affect their objectivity. Where a dealer failed to make that disclosure adequately — or where a lender permitted a DCA knowing the broker had not disclosed it — there may have been a breach of FCA rules that contributes to an unfair relationship finding.

Common law duties

The Court of Appeal's 2024 rulings also engaged common law principles: where a broker acts as an agent for a consumer and also receives a commission from the lender, fiduciary or half-fiduciary duties may arise, requiring informed consent before the commission can lawfully be accepted. Non-disclosure of a secret profit is a well-established basis for unwinding a transaction at common law.

How the Complaint and Financial Ombudsman Route Works

Even while the FCA review is ongoing, you can submit a complaint directly to the relevant lender. Here is the typical sequence:

1. Identify your lender. The finance company is named on your agreement, not the car dealer. Common lenders include Black Horse, Santander Consumer Finance, Moneybarn, Close Brothers, FirstRand Bank (MotoNovo), and others.
2. Submit a formal written complaint. Refer to the DCA issue and, where relevant, the unfair relationship provisions of the Consumer Credit Act 1974. Request a copy of your original credit agreement and any commission disclosure documents under your Subject Access Request rights (UK GDPR).
3. Wait for a final response — or note the pause. Because of the FCA review, many lenders are currently pausing final responses to motor finance commission complaints. The FCA has extended the pause period while it finalises its approach. Your complaint is still being logged; the clock is not necessarily running against you during the pause, but keep records of everything.
4. Refer to the Financial Ombudsman Service (FOS). Once a lender issues a final response (or, once the FCA-permitted pause ends without a response), you have six months to refer the complaint to the FOS. The FOS is free to use and applies the "fair and reasonable" test, which is broadly aligned with the unfair relationship test.
5. FCA redress scheme. The FCA has indicated it may introduce a scheme that bypasses the need for individual FOS referrals. If it does, lenders may be required to proactively contact affected customers. Keep your contact details current with your lender.

What Redress Could Look Like

Individual outcomes vary and nothing is guaranteed, but based on the FCA's analysis and the principles established in court decisions, redress in successful cases could include:

• Refund of the interest overcharge — the difference between the rate you were charged and the rate you could reasonably have been offered without the DCA incentive, plus interest on that sum.
• Reduction of the outstanding balance on agreements still running.
• Removal of adverse credit markers if missed payments resulted from the inflated cost.
• Compensation for distress and inconvenience in certain cases, though this is typically a smaller element.

The FCA's 2019 analysis suggested a typical consumer affected by a DCA could have paid an additional several hundred pounds over the life of their agreement, though the actual figure depends on the specific rate applied, the loan amount, and the term. For larger or longer agreements, the potential overcharge can be considerably higher.

These are illustrative figures only. Your potential redress — if any — depends entirely on the facts of your own agreement and any applicable legal framework at the time your case is assessed.

How to Start and What Paperwork Helps

Starting a complaint is straightforward. Gathering the right documents will strengthen your position. Here is what to look for:

Documents to gather

• Original credit agreement — signed at the time of purchase, setting out the APR, total charge for credit, and repayment schedule. If you no longer have it, request a copy from the lender under s.77 or s.78 Consumer Credit Act 1974 (a statutory right; the lender must provide a copy within 12 working days for a nominal fee).
• Finance illustration or quote document — any pre-contractual information sheet (SECCI or PCCI) you were given before signing.
• Correspondence from the dealer and lender — emails, letters, or printed quotes from the dealership.
• Proof of payments made — bank statements or Direct Debit records.
• Any commission disclosure notice — if you were given one (you probably were not, which is the point).

What to include in your complaint letter

• Your full name, address, agreement number, and the vehicle details.
• A clear statement that you believe the agreement involved a discretionary commission arrangement and that this was not disclosed.
• Reference to s.140A Consumer Credit Act 1974 and/or CONC rules as relevant.
• A request for the lender to confirm whether a DCA was in place and, if so, to provide full details of the commission paid to the dealer.
• A clear remedy sought — typically a refund of the interest overcharge plus compensatory interest.

Frequently Asked Questions

I no longer have my original agreement. Can I still complain?

Yes. Under sections 77 and 78 of the Consumer Credit Act 1974, you are entitled to request a copy from the lender at any time during the agreement or within a reasonable period after it ends. The lender must provide a copy within 12 working days. A small statutory fee (currently £1) may apply.

Does it matter which car dealer I used?

The complaint is typically directed at the finance company (lender), not the dealer, because the lender is the creditor under the Consumer Credit Act. The dealer's conduct is relevant evidence, but the lender bears regulatory responsibility for ensuring proper disclosure and for the fairness of the relationship.

My agreement ended years ago. Am I too late?

Possibly not. The unfair relationship jurisdiction under s.140A CCA 1974 can apply for a period after the agreement ends, and the FOS has broad jurisdiction over complaints going back several years. However, limitation periods do apply. The position is legally complex, and the FCA review may introduce specific rules about how far back claims can go. Act sooner rather than later.

Will using a claims management company cost me money?

Claims management companies (CMCs) typically charge a percentage of any redress received — fees vary but can be significant. You are not required to use a CMC. You can complain directly to your lender and then to the FOS yourself, free of charge. If you do use a CMC or solicitor, ensure any fee arrangement is clearly explained in writing before you sign anything.

I have a PCP balloon payment coming up. Should I still pay it?

This is a question for a regulated financial adviser, not this article. Do not withhold payments on the basis of a potential claim without specific legal advice — doing so could affect your credit file and your legal position.

My car was bought on a 0% finance deal. Am I affected?

If the deal was genuinely 0% APR, a DCA raising your rate would not typically apply. However, some "0%" deals involve subsidised rates where the dealer received different forms of benefit. If you are unsure, it is still worth reviewing your agreement documentation.

Take Action Now

The car finance commission scandal is one of the largest consumer redress issues in the UK since payment protection insurance (PPI). The FCA has already found widespread harm, courts have confirmed the legal basis for claims, and a formal redress framework is expected. The main uncertainty is timing, not whether harm occurred.

The best thing you can do now is to locate your original agreement, check whether a DCA was in play, and register your complaint with the lender so that you are in the queue when the redress process is finalised. If you are unsure whether your agreement qualifies, check your agreement with our free car finance claim checker — it takes a few minutes and there is no obligation.

Ready to take the next step? Start your car finance complaint assessment now →