Introduction: Why 2025 is a turning point for car finance mis-selling

Updated: 17 September 2025

Originally Published: 31 May 2025

If you financed a car between 2007 and 2021, there is a real chance your agreement deserves a second look. Millions of motorists took out PCP or HP deals that seemed sensible at the time, yet later turned out to include costs or conflicts that were never properly explained. In 2025, the picture sharpened. In August 2025, the Supreme Court handed down a mixed ruling on hidden commissions [1]: it narrowed some legal routes but confirmed that non-disclosure can contribute to an unfair relationship in certain circumstances, especially where commissions were very high and disclosure inadequate. This keeps a meaningful path open for consumers, even if it is not the blanket win that some expected. 

Alongside the courts, the FCA has kept a formal pause on final responses to DCA-related complaints while it designs a consistent way to fix things at scale. The regulator has already banned discretionary commission arrangements (DCAs) from 28 January 2021 [2], and it will consult in October 2025 on a compensation scheme that is expected to cover DCAs and other undisclosed commission issues. 

The numbers are large. Reports suggest that around 14 to 15 million historic contracts may have involved the DCA model, and a potential industry bill up to about £18 billion is being discussed [3]. These are planning figures rather than confirmed payouts, but they indicate the likely scale of redress if the FCA’s scheme proceeds. 

What this guide covers

• What mis-sold car finance looks like in the real world
• How to recognise if your deal was affected
• How mis-selling can harm your credit file and finances
• The difference between undisclosed commissions and DCAs
• Timelines and what the FCA pause really means
• Who may be eligible and what you could recover
• How to start a claim today, with or without a representative
• Why acting now still matters in 2025

1. What is mis-sold car finance?

Car finance mis-selling means the finance you were given was not fairly or clearly presented, or it was not suitable for your circumstances. In practice, several patterns show up again and again.

The scale of car finance between 2007 and 2021

Before looking at specific mis-selling practices, it helps to understand how common car finance became during these years.

By the late 2010s, most new cars in the UK were bought on finance [4] rather than paid for outright. PCP and HP were the default for drivers who wanted lower upfront costs or the flexibility to change cars every few years. Millions of households took these agreements believing them to be standard and straightforward.

The way they were sold, however, left many people exposed. Dealers and brokers were often paid commissions by lenders, but these payments were rarely explained. In many cases the structure of the deal favoured commissions over the customer’s long-term affordability.

High volumes of contracts, combined with unclear selling practices, meant mis-selling could persist for more than a decade. What looked like a routine way to get a car often became a costly commitment built on information that was incomplete or not fairly presented.

Affordability failures

Lenders must check whether you can afford the agreement over its full term, not just month one. If checks are rushed or superficial, customers can be approved for payments that do not sit safely alongside rent or mortgage, utilities, insurance and family costs. Early arrears, constant juggling and a stressed budget are often signs the original assessment was not good enough.

What it felt like for many people: a monthly figure that seemed fine in the showroom slowly crowded out essentials at home. Within months, the account started slipping and the credit file took hits. The agreement existed, but it was not a good fit.

Hidden cost and unclear explanations

Sales conversations often focus on the monthly number. Without a clear picture of the total cost of borrowing, term length, fees and optional add-ons, a low monthly payment can mask a much more expensive contract overall. People later discovered that the headline rate was not the whole story once extras, structure and term were accounted for.

Undisclosed commissions

Many dealers and brokers were paid by lenders for arranging finance. That alone is not necessarily unlawful. The problem was that customers were not told clearly about these payments or what they meant. The Supreme Court’s August 2025 ruling confirms that non-disclosure can contribute to an unfair relationship under the Consumer Credit Act, particularly where commissions were large and not properly disclosed. This does not create an automatic refund for everyone, but it preserves a strong route for cases where secrecy mattered to price or choice. 

DCAs: when the interest rate could be pushed up

A Discretionary Commission Arrangement (DCA) is a specific type of commission model. In a DCA, the lender lets the dealer choose the customer’s interest rate within a band. The higher the dealer set the rate, the more commission the dealer earned. Customers were rarely told that their rate had been set this way. The FCA banned DCAs from 28 January 2021 because the conflict of interest could not be managed fairly. 

The Supreme Court did not decide DCAs specifically in August 2025, but its approach to transparency supports the FCA’s plan to design a redress route that deals with DCA harm in a consistent way. 

2. How do I know if I was mis-sold?

You may only spot the clues years later. The question is not whether you signed the contract. It is whether you were given a fair and transparent choice.

Clear warning signs

• A large balloon payment at the end of a PCP that was not explained plainly at the start.
• An interest rate that looks higher than your credit profile would suggest, with no clear reason given.
• No proper disclosure that a commission was paid to your dealer or broker.
• Weak or rushed affordability checks where no one explored your essential outgoings or asked for supporting documents.

Subtle signs you notice later

• You had to cut back on essentials to keep the car paid.
• You refinanced mid-term to cope, which pushed up total interest.
• You finished monthly payments only to find the car still required a large final payment you had not budgeted for.
• Your credit report shows late payments or defaults involving the finance.

You do not need to still own the car and you do not need to have missed payments to raise a complaint once the scheme is live.

3. How mis-sold car finance affects your credit score

The harm is not just the extra money you paid. It can leave long shadows on your financial record.

Missed or late payments stay on your file for up to six years, making future borrowing more expensive. Defaults are more serious still, and repossession can disrupt work and family life. Many people tried to fix the pressure by refinancing, which often rolled existing debt into a new agreement and increased the total cost.

There is a path back. If your complaint is upheld, unfair markers linked to the mis-sold agreement can be removed. Pair that with on-time payments for smaller commitments and you begin to rebuild your score. The end result is not simply a refund. It is the chance to tidy up your credit file and move on more confidently.

4. Undisclosed commissions and DCAs: the crucial difference

Everything turns on clarity and incentives.

Undisclosed commissions are payments from a lender to a dealer or broker that were not clearly explained to you. The law now recognises that poor or absent disclosure can contribute to an unfair relationship, especially where the commission was large enough to distort price or advice. Cases will turn on facts, but secrecy about money changing hands matters. 

DCAs are a subset of undisclosed commissions. They went further by letting the dealer raise your rate to raise their own commission. The FCA banned DCAs in January 2021 and is now designing how to compensate fairly for past use of this model. 

Why this matters in 2025: The Supreme Court’s ruling limited certain legal routes but confirmed that secrecy around commissions, particularly where sums were significant, can still give rise to unfairness. As the FCA prepares its October 2025 consultation, discretionary commission arrangements are expected to sit at the centre of plans for a structured redress scheme.

5. How long does a mis-sold car finance claim take?

Timeframes depend on your facts and the regulator’s timetable.

Before the pause, lenders had eight weeks to issue a final response, after which you could go to the Financial Ombudsman Service. Simple complaints may finish in 6 to 16 weeks. Complex ones may take much longer.

Since January 2024, the FCA has paused the eight-week final-response requirement for DCA complaints and extended Ombudsman referral windows [5] in order to design a mass-redress pathway that is consistent and orderly. The pause has been formally extended to 4 December 2025. You can still complain today and have your position recorded, but final responses are not required until the pause lifts or a scheme begins. 

What to expect next

The Supreme Court ruling clarified parts of the law in August 2025, which should help reduce unnecessary disputes over first principles. 

The FCA consultation in October 2025 will propose how compensation is calculated and delivered [6], likely with a bulk process similar to PPI but tailored to car finance. 

Given the scale, backlogs are likely once payments begin. Submitting now still matters because it secures your place in the queue. Equipped with the most recent information on car finance claims in the UK, clients may be able to reclaim overpayments arising from unfair lending policies. 

6. Are you eligible for compensation?

Eligibility is broader than many think. You do not need to have defaulted, and your agreement does not need to be active today.

You are likely to be eligible for assessment if:

• You took out PCP/HP financing between April 2007 and January 2021.
• You were not told clearly about a commission paid to your dealer or broker.
• Your interest rate looks higher than your credit profile would suggest, with no clear reason given.
• Affordability checks were weak or rushed.
• The end of having a PCP balloon payment was not explained clearly.
• You left the showroom without really understanding how the agreement worked.

Short examples that often point to mis-selling: a nurse, approved for £400 a month, falls behind within six months because the budget never worked on paper; a young driver was charged 10 percent where a fair rate might have been nearer 6 percent for their profile; a customer who completes payments then discovers a £6,000 balloon that was never spelled out; a family who refinances mid-term and ends up paying more overall.

As the FCA consultation concludes, the regulator is expected to firm up eligibility rules and standardise calculations, particularly for DCA cases. 

7. What you could recover

The outcome depends on your agreement size, term, rate, and how the commission worked. Think in four parts.

Refund of overpaid interest

Where commission secrecy or a DCA inflated your rate, you can seek a refund of the extra interest you paid, once rules are in place.

Worked example

You took a £12,000 PCP in 2016. A fair rate might have been 6 percent APR, giving a total of about £13,520 over four years. A 10 percent APR rate instead yields about £14,800. The difference, around £1,280, represents overpaid interest that could be refunded if your case qualifies.

Useful benchmarks

The FCA’s impact analysis showed that one common DCA model could add around £1,100 in extra interest on a £10,000, four-year agreement. That is an estimate of harm from the model, not a guaranteed payout. 

Press and regulatory briefings suggest the average redress for DCA cases is likely to be around £950 per agreement [7] once a scheme is finalised. This is an average. Some people will receive less, others more, depending on loan size and term. 

Repayment of hidden commissions

If a commission was not properly disclosed, that payment may be returned to you. For example, a concealed £500 fee could be repaid if your case meets the rules.

Compensation for distress and inconvenience

If mis-selling led to arrears, default, collection activity or repossession, there may be an additional award for distress and inconvenience. The size depends on the severity and duration of the impact and will be set by the scheme rules or Ombudsman outcomes once processing resumes.

Credit file corrections

If the agreement damaged your credit record and your complaint is upheld, the lender may be required to remove or amend unfair markers.

The national picture and what it means for you

Reporting suggests 14 to 15 million historic contracts involved the DCA model [8], and the FCA’s consultation will consider a scheme with a potential £9 to £18 billion bill across the industry [9]. For individuals, many mid-range mis-sold car finance claims fall in the £1,000 to £5,000 bracket, with higher outcomes for larger loans or multiple agreements. The £950 average for DCA cases is a reasonable planning number, not a promise [10]. 

8. How to claim mis-sold car finance

You have two straightforward routes. You can do this yourself or appoint a regulated representative. Either way, the key is to start now so your case is recorded.

Complain directly to your lender

This route is free and you keep everything you recover. Write to the lender explaining why you think the agreement was mis-sold, for example due to undisclosed commissions, a DCA-inflated rate, weak affordability checks or unclear balloon terms. Because of the FCA pause, the lender does not have to issue a final response within eight weeks for DCA complaints, but your complaint will be logged. 

If the lender rejects your complaint after the pause lifts or a scheme starts, you can go to the Financial Ombudsman Service.

Pros

• No fee.
• Full control of the process.

Cons

• You manage the paperwork and follow-up.
• Timelines are tied to the pause and the scheme.

Use a regulated claims management company or law firm

A finance claims expert or a regulated PCP claims company can gather evidence, prepare your case and deal with the lender for you, usually on a no win, no fee basis. They will charge a percentage of your refund if successful. Choose a regulated firm and read the fee agreement carefully.

Pros

• Saves time.
• Helpful for complex or multiple agreements.

Cons

• A fee applies on success.
• Quality varies, so check credentials.

Documents that help

• Your finance agreement. If you do not have it, the lender should provide a copy on request.
• Emails or messages with the dealer or broker.
• Bank statements showing repayments.
• Anything that shows commission was not disclosed or that explains how your rate was presented.

Do not panic if you are missing documents. Lenders must keep records, and a good representative can often obtain what is needed.

A typical journey

• Initial check. List the reasons you believe the deal was mis-sold.
• Submission. Send your complaint to the lender and keep a copy.
• Logging. Your case is recorded during the pause.
• Decision. When the scheme begins, the lender applies the rules to your case.
• Outcome. Payment is made if you qualify. Credit file corrections follow where appropriate.

9. Why now is the time to act

The legal position is clearer after the August 2025 Supreme Court ruling, and the FCA will consult in October 2025 on the scheme that should unlock payments next year. Waiting until the headlines arrive risks joining the queue late. With millions of potential cases and a pause until December 2025, early submission gives you a better place when processing starts. 

There may also be a deadline later, similar to PPI. Submitting now reduces the risk of missing out if a cut-off is introduced and helps you get ahead of any backlog once the scheme opens. 

10. Frequently Asked Questions

Can I claim if I have already finished paying?

Yes. Your right to be assessed does not depend on the agreement being active. Many people only discover issues years after finishing. While final payouts are not happening during the pause, older agreements can still be logged now and assessed once the FCA scheme is live. 

Does making a complaint affect my credit score?

No. Complaining does not harm your score. If your case is upheld, unfair markers linked to the agreement can be removed under the scheme rules or by the Ombudsman.

What if I refinanced or traded the car?

You may still qualify. The key question is whether the original agreement was mis-sold. Refinancing often made total costs worse rather than better.

How much could I receive?

Outcomes vary. The FCA’s analysis indicates the average DCA redress could be around £950 per agreement once the scheme is finalised, while the impact assessment for the 2021 ban showed a common DCA model could add about £1,100 of extra interest to a £10,000 four-year loan. These are planning numbers, not guarantees.

What if my documents say “a commission may be paid”?

Vague wording is unlikely to give you the clarity the law expects. Disclosure should help you understand what the commission is, who pays it, and how it could affect your deal. The Supreme Court’s approach keeps claims open where secrecy and size mattered. 

What happens if the FCA sets a deadline?

Late complaints may not be considered. Submitting now protects your position and helps you avoid last-minute surges.

Can I complain if the dealer has closed or the lender has changed names?

Yes. Responsibility usually sits with the lender or its successor. The scheme is being designed to handle these realities.

Will I need to go to court?

Unlikely. It is hoped that lenders, the Ombudsman, and the FCA will resolve cases outside of court.

Will the scheme cover everything, or only DCAs?

We will know after the October 2025 consultation, but current FCA statements point to DCAs and undisclosed commission issues being central, with scope for connected unfair practices. 

Conclusion: Protecting your rights in 2025

The problem of the car finance mis-selling scandal is one of the biggest consumer fairness issues in the UK. And the Supreme Court has stated that transparency matters, even without a blanket ruling for consumers. The FCA has banned the worst commission model, kept a pause to design a fair scheme, and will consult in October 2025 on how to compensate people consistently. If you had finance between 2007 and 2021, now is the time to put your case on record so you are not left behind when processing begins. 

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References:

1. In August 2025, the Supreme Court handed down a mixed ruling on hidden commissions - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
2. banned discretionary commission arrangements (DCAs) from 28 January 2021 - https://www.fca.org.uk/publications/policy-statements/ps20-8-motor-finance-discretionary-commission-models-and-consumer-credit-commission-disclosure
3. around 14 to 15 million historic contracts may have involved the DCA model, and a potential industry bill up to about £18 billion is being discussed - https://www.fca.org.uk/news/press-releases/fca-consult-motor-finance-compensation-scheme
4. most new cars in the UK were bought on finance - https://www.am-online.com/news/finance/2022/11/02/uk-car-finance-debt-soars-to-40bn
5. FCA has paused the eight-week final-response requirement for DCA complaints and extended Ombudsman referral windows - https://www.fca.org.uk/publication/consultation/cp24-15.pdf
6. The FCA consultation in October 2025 will propose how compensation is calculated and delivered - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
7. average redress for DCA cases is likely to be around £950 per agreement - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
8. Reporting suggests 14 to 15 million historic contracts involved the DCA model - 
9. FCA’s consultation will consider a scheme with a potential £9 to £18 billion bill across the industry - https://www.moneysavingexpert.com/news/2025/08/car-finance-supreme-court-martin-lewis/
10. £950 average for DCA cases is a reasonable planning number, not a promise - https://www.which.co.uk/news/article/car-finance-fca-investigation-what-you-need-to-know-a4eXb5u8VeBy