How do I know if I was mis-sold car finance?

You may have been mis-sold car finance if: you took out a PCP or HP agreement between 2007 and January 2021, you weren't told the dealer could set your interest rate, your interest rate seems higher than the lender's headline rate, or you feel you weren't given a fair deal. Request your finance agreement and ask the lender whether a DCA was used — they must tell you.

How do I claim for car finance mis-selling?

First, gather your finance documents (or request them from the lender). Write to the lender explaining you believe you were affected by a discretionary commission arrangement and ask for redress. If they reject your claim, escalate to the Financial Ombudsman Service (FOS) for free. Avoid claims management companies — they typically charge 25-40% of your compensation.

How much compensation could I get for car finance mis-selling?

The FCA's review found the average overcharge was around £1,100 per agreement. Your actual compensation depends on how much extra interest you paid due to the inflated rate. Some consumers have received between £1,000 and £5,000, though amounts vary based on the loan size, term, and rate difference. You may also receive 8% statutory interest on overpaid amounts.

Do I need a claims management company?

No — and using one will significantly reduce your payout. Claims management companies typically charge 25-40% of your compensation (plus VAT), meaning you could lose over £400 on a £1,100 claim. Complaining to the lender yourself is straightforward, and escalating to the Financial Ombudsman is free. The only advantage of a CMC is convenience, but templates are freely available.

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Car Finance Mis-Selling Claims UK — How to Check If You're Owed Money

Q: What is the car finance mis-selling scandal?

The FCA found that many car dealers used 'discretionary commission arrangements' (DCAs) that allowed them to increase your interest rate and keep the difference as commission. This practice was banned in January 2021, but millions of PCP and HP agreements from 2007-2021 may have been affected. The FCA estimates consumers were overcharged by an average of £1,100, with total potential redress in the billions.

Millions of UK car buyers may be owed compensation for mis-sold car finance. The FCA found lenders allowed dealers to inflate interest rates via discretionary commission arrangements. Here's how to check and claim.

By PocketWise · 15 April 2026 · 5 min read

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If you bought a car on finance between 2007 and January 2021, you may be owed compensation. The Financial Conduct Authority (FCA) found that many car dealers used commission arrangements that allowed them to inflate your interest rate — and keep the extra money as hidden profit.

This guide explains how the scandal works, whether you’re affected, and how to claim without using a claims management company (which would take a chunk of your payout).

What Is the Car Finance Mis-Selling Scandal?

When you get car finance through a dealership — typically PCP (Personal Contract Purchase) or HP (Hire Purchase) — the dealer arranges the loan through a lender. What most buyers didn’t know is that dealers could often set your interest rate within a range provided by the lender.

Under something called a Discretionary Commission Arrangement (DCA), the higher the interest rate the dealer set, the more commission they earned. This created a clear incentive to charge you more.

How DCAs Worked
Lender’s base rate	e.g., 5%
Dealer’s discretion	Could add up to 3-5% extra
Your rate	Could end up at 8-10%
Dealer’s commission	A percentage of the extra interest you pay

The FCA banned these arrangements in January 2021, but millions of existing agreements were affected.

How Much Could You Be Owed?

The FCA’s review found:

Finding	Amount
Average overcharge per customer	Around £1,100
Total potential redress	Potentially billions across all affected customers
Affected period	Agreements from 2007 to January 2021
Affected products	PCP and HP agreements arranged through dealers

Individual payouts depend on:

The size of your loan
How much your rate was inflated above the lender’s base rate
The length of the agreement
Whether you paid 8% statutory interest on top

Some consumers have reported successful claims of £1,000-£5,000, though amounts vary widely.

Are You Affected?

You may have been affected if:

✅ You took out car finance (PCP or HP) through a dealer between 2007 and January 2021

✅ The dealer arranged the finance (not you applying directly to a bank)

✅ You weren’t clearly told the dealer could set your interest rate

✅ Your interest rate was higher than the lender’s advertised rate

✅ The dealer didn’t present alternatives or explain their commission

You’re less likely to be affected if:

❌ You arranged finance directly with a bank or credit union

❌ Your agreement was after January 2021 (DCAs were banned)

❌ You used 0% finance or manufacturer-subsidised rates

❌ You bought from a private seller

How to Check Your Finance Agreement

Step 1: Find Your Paperwork

Dig out your original finance agreement. Look for:

The lender’s name (e.g., Black Horse, Close Brothers, Alphera, Santander)
Your APR / interest rate
The dealer’s name
Whether commission is mentioned

If you’ve lost it, contact the lender — they must provide you with a copy.

Step 2: Ask the Lender About Commission

Write to the lender (email or letter) and ask:

“Please confirm whether my finance agreement [reference number] included a discretionary commission arrangement (DCA). If so, please provide details of any commission paid to the dealer and how my interest rate was determined.”

The lender must respond within 8 weeks.

Step 3: Compare Your Rate

Was your APR significantly higher than:

The lender’s advertised rates at the time?
Rates offered to similar customers?
Your credit score would suggest?

Even if you had poor credit, an unusually high rate may indicate inflation by the dealer.

How to Claim Compensation

Option 1: Complain Directly to the Lender (Recommended)

This is free and straightforward:

Write to the lender — Explain you believe you were affected by a DCA and ask for redress
Include: your name, agreement reference, approximate date of agreement, and that you weren’t told about discretionary commission
Wait for response — The lender has 8 weeks
If rejected: Escalate to the Financial Ombudsman

Template letter:

Dear [Lender],

I am writing to complain about my car finance agreement [reference number] taken out on [approximate date] through [dealership name].

I believe this agreement included a discretionary commission arrangement (DCA) that allowed the dealer to set my interest rate and earn more commission by charging me a higher rate. I was not made aware of this arrangement at the time.

I request that you:

Confirm whether a DCA was used

Provide details of commission paid to the dealer

Explain how my interest rate was determined

Offer redress if I was affected

I expect a response within 8 weeks.

Yours faithfully, [Your name]

Option 2: Financial Ombudsman Service (If Rejected)

If the lender rejects your complaint or doesn’t respond within 8 weeks:

Submit a complaint to the Financial Ombudsman Service
This is completely free
The Ombudsman can order compensation if they agree you were treated unfairly
Their decision is binding on the lender (but you can still reject it and go to court)

Option 3: Claims Management Companies (Avoid If Possible)

Claims management companies (CMCs) will handle the process for you, but:

CMC Fees
Typical fee	25-40% of your compensation plus VAT
On a £1,100 claim	You could lose £330-£530
On a £3,000 claim	You could lose £900-£1,440

They do the same thing you can do yourself for free. The Ombudsman process is designed for consumers — no legal knowledge needed.

Current Status of Claims

The FCA paused the normal time limits for motor finance complaints while they conducted their review. Key dates:

Event	Date
DCAs banned	January 2021
FCA review launched	January 2024
Court judgment in Hopcraft case	Clarified lenders’ duties
Normal complaint deadline	3 years from when you became aware (but extended by FCA pause)

The FCA has said lenders should not reject valid claims, and the Ombudsman is handling thousands of cases.

What If the Lender Has Gone Bust?

If the original lender no longer exists:

Check if they were bought by another company (who inherits complaints)
Contact the Financial Services Compensation Scheme (FSCS) if they were authorised
The FSCS can pay compensation up to £85,000 per person per firm

Summary

Step	Action
1	Find your finance agreement or request it from the lender
2	Ask the lender to confirm whether a DCA was used
3	Lodge a complaint requesting redress
4	If rejected, escalate to the Financial Ombudsman (free)
5	Avoid claims management companies — they take 25-40%+

If you took out car finance through a dealer between 2007 and January 2021, it’s worth checking. The average successful claim has been around £1,100 — money that was yours all along.