Updated: 13 October 2025

Originally Published: 10 July 2025

Key Takeaways:

• You may be entitled to a refund of a car loan for regulated motor finance agreements that you entered into between 6 April 2007 and 1 November 2024.
• Check if you have any signs of mis-selling like undisclosed commissions or higher rates than advertised.
• Understand your rights and follow the complaints process step by step.
• Keep up with the latest news.
• Don’t hesitate to ask for advice if you are not sure where to start.

Introduction

In recent months, the UK car finance industry has come under scrutiny as a large-scale mis-selling scandal deepens, threatening to overshadow even the notorious PPI crisis in terms of numbers and impact. As the pivotal Supreme Court (SC) ruling and FCA open consultation set the stage for a watershed moment, thousands of consumers are questioning; Am I eligible for car loan compensation? and How can I claim what I’m owed?

In this handy guide, we take a look at the car finance scandal. Find out how to see if you have been mis-sold, how to prevent being mis-sold finance in the future, what Discretionary Commission Arrangements (DCAs) are, your consumer rights, and the latest updates on settlements.

Who Is Eligible? Your Car Finance Compensation Checklist

You may be due compensation if you arranged car finance in the UK between 2007 and 2024. You may have a claim if your loan was not sold in a fair, transparent way and always in your best interests.

Here are key indicators to help you determine if you might have a claim:

• You weren’t told that your broker or dealership made commission on your finance agreement.
• The dealer chose a finance product that benefitted them (higher commission) instead of one that suited your needs.
• You were ‘sold’ a loan at a higher interest rate than you would have qualified for.
• You weren’t given a clear explanation of the loan terms, costs, and alternatives.
• You were rushed into signing by the salesperson with no time to think it over.

If any of the following applies to you, you may be able to claim compensation. The Financial Conduct Authority (FCA) has already flagged concerns about hidden commissions [1] and opaque practices, and many claims are currently progressing through the Financial Ombudsman Service (FOS) and the courts.

For peace of mind, it’s a good idea to check car finance claim eligibility even if you’re unsure. Many tools and advisers can help you assess your agreement, review the documents, and confirm whether you have a case, often at no upfront cost. Follow these simple steps and save time in getting to grips with your rights.

How to Know If You Were Mis-Sold a Car Finance Deal

Even if you suspect wrongdoing, it’s not always obvious if you were mis-sold. To help you assess your situation, consider these questions:

Did the dealership disclose how much commission they were earning?

If a salesperson failed to make it clear to you that they were receiving a commission from a lender for arranging your finance, this may be mis-selling. This is important because this could have affected the deal that they gave you, which is normally that you overpaid.

Were you shown a breakdown of costs, including interest and fees, before signing?

You would have received an itemised written statement showing how much you would pay back, including the rate of interest, any arrangement fee and optional extras. If the dealership fudged it or omitted important details, then it is a sign that they did not explain the agreement properly, which is another red flag of mis-selling.

Were you offered alternatives or told about cheaper options?

Sales staff should have presented you with a range of options, such as hire purchase, PCP, or a personal loan, and explained the differences. If you were only offered one product, particularly if it came with a higher interest rate and were not told about more competitive alternatives, the deal may not have been in your best interest.

Did the salesperson suggest other means instead of in-house finance to get the car?

Some dealerships mislead customers into believing that using their in-house finance is mandatory to complete the purchase or secure a discount. The claim is not true. You have every right to obtain your own finance from another source. If you felt pressured to use their lender under false pretences, that could constitute mis-selling.

These questions aim to help you reflect on how your agreement was handled. If you said no to any of the above questions, it is possible you have been mis-sold. Documentation is key so gather your loan agreement, correspondence, and any notes about the conversation at the time. These will support your claim.

PCP Mis-Selling Explained: How to Claim What You’re Owed

The PCP agreement was one of the products involved in the scandal. Personal Contract Purchase (PCP) is a popular way to finance a vehicle purchase but has also proven to be a breeding ground for mis-selling.

PCPs are like car loans. They give you the option to return the car or pay a final sum to keep it. However, many consumers were not informed about the full costs, limitations, or commissions tied to the agreement.

Some dealerships arranged PCPs with higher interest rates simply to earn bigger commissions from the lender, leaving customers paying thousands more than necessary. Had this occurred to you, you might be entitled to a refund of the overcharged interest and charges.

To understand more about how PCP mis-selling works and how you can start a claim, read this guide: PCP Mis-Selling Explained: How to Claim What You’re Owed.

How to Avoid Mis-Sold Car Finance Deals in the Future

As thousands seek to be recompensed over past deals, thousands more are asking themselves how they can not be mis-sold again. Here are a few tips to help you:

• Always ask if the salesperson is earning commission on the loan and how it affects your deal. Being informed as to whether, and by what amount, the commission is being earned by the dealer or broker may enable you to determine whether the deal is really in your best interests. A high commission might mean you’re being offered a more expensive loan than necessary, so asking this question can encourage transparency and potentially save you money.
• Shop around; get quotes from multiple lenders, not just the dealership. Dealers typically earn a commission on the financing they provide. Because of this, the deal they offer may not be the best available. Comparing rates from your bank, credit union, online lenders, and independent brokers can help ensure you get the lowest rate and most appropriate product.
• Review all paperwork thoroughly before signing and take it home if possible. It’s easy to miss important details when you’re excited to get a new car, but contracts can contain clauses or charges that aren’t immediately clear. By simply spending time and perusing through all the content, preferably, when you are not in a hurry and when you are at home, you can easily notice any red flags before you get into something.
• Ask questions. If there's something you don't understand, ask about it. Never feel rushed to make a decision. If a line on the agreement is unclear, ask for an explanation. A good dealer will have no problem with this. Finally, never be rushed into signing the paperwork right then and there.
• You might like to try using an independent broker with a good reputation, or contact your bank directly. Independent brokers and mainstream lenders are also more likely to be transparent and competitive than dealerships. They might offer you better rates and clearer explanations of your options because they’re not beholden to pushing a specific product.

By following the above steps you will minimise the risk of overpaying and getting a product that isn’t right for you and also ensure you don’t end up in the same position as the thousands of people now applying for car finance compensation. Be aware and be aggressive; it will help ensure you get a fair and transparent deal.

The Three Types of Unfair Arrangements

The FCA outlined three types of commission arrangements that could render a finance deal unfair unless the customer had been fully informed [2].

1. Discretionary Commission Arrangements

What Are DCAs and Why Do They Matter?

At the centre of this legal and regulatory battle has been a practice known as Discretionary Commission Arrangements, or DCAs. These agreements between brokers and dealers allowed them to set the interest rate offered to the customer, the higher the rate, the higher the commission.

The problem? Customers were rarely told that their rate had been inflated simply to boost the dealer’s income. DCAs were banned in 2021 after the FCA ruled that they incentivised unfair practices and resulted in consumers overpaying.

If your car loan involved a DCA before the ban, you may have paid significantly more than you should have. Understanding how these arrangements worked is vital to assessing your claim. This Discretionary Commission Arrangements guide offers more insights..

It is also important to recognise that DCAs are just one example of a wider issue with car finance commission practices. Even outside of formal discretionary arrangements, many customers were unaware that their finance agreements included undisclosed commissions that influenced the deal they were offered. This lack of transparency about the car finance commission has become a central concern in the current scandal, as it has often resulted in consumers paying unnecessarily high costs.

2. High Commission Arrangements

This is where a large chunk of the total cost of credit is the broker’s commission. The FCA defines a “high commission” as 35 per cent or more of the total cost of credit and 10 per cent or more of the loan amount. Customers should have been informed about these payments to allow them to make an informed choice.

3. Exclusive or Tied Lender Arrangements

Brokers with exclusive partnerships with certain lenders had limited the options available to customers. Many believed they were being offered the best possible deal, when in fact they were not being shown all the options.

If any of these features were not disclosed, the FCA says the agreement should be considered unfair.

Consumer Rights: What We Know So Far About Claims Against Lenders

If you’ve established that you were mis-sold, what are your next steps? Fortunately, consumers in the UK have a very strong protection under the Consumer Credit Act and FCA regulations. Here’s what to keep in mind:

• You can complain directly to the lender (not just the dealership). They are responsible for the agreement. This is also the case if you negotiated your finance deal through a dealer. Even then, it is the lender (the finance company that is actually lending the money) who is ultimately responsible for making sure the agreement was fair and that you were treated honestly and openly. If you have a complaint, you should make it to the lender, not the dealer. They are the ones who are regulated and who are responsible under the law.
• If the lender refuses to deal with your complaint, you can take it to the FOS. If you’re not satisfied with the lender’s response or they deny your claim, you can take the matter to the independent Financial Ombudsman Service. The FOS will look at your complaint and make a fair judgement.
• You can get the help of a claims management company, and some people choose to use a finance claims expert for convenience. Claims management companies (CMCs) can take care of the process for you, but they tend to charge a percentage of the payout. To avoid upfront costs, it’s best to choose a CMC that operates under a no win, no fee scheme. The cost is something to consider versus the convenience of them doing it for you.
• Make a note of all your correspondence, the agreement and any proof of mis-selling. For evidence, you will want to include as much as you can, including your original finance agreement, any emails, letters and notes of what was said during the sales process, etc. This will help show how the agreement was sold to you and where the failure of disclosure and fairness lies.

Knowing and asserting these rights dramatically increases your odds of getting what’s owed to you. Being organised, informed and persistent through the process helps ensure that you’re treated fairly and that your complaint is taken seriously.

Different lenders may process claims in different ways. The FCA is likely to provide further guidance in the light of the SC decision. In the meantime the best course of action is to act quickly and use the complaints process as this offers the best prospect of success.

Lender-Specific Claims: What to Know About Black Horse, Close Brothers, MotoNovo, and Other Lenders

If you financed your vehicle through Black Horse, you may be entitled to compensation if your loan involved undisclosed commissions or inflated interest rates. Many customers are now exploring their options and filing complaints directly with the lender. To learn more about your rights and how to proceed, visit this guide: Understanding Black Horse Finance Claims: Who Can Claim and How It Works.

In a similar way, claims are also being made by Close Brothers customers who were mis-sold. If you think you have paid an unfair rate and were not told about the commission payments, you may also have a claim. This resource explains what steps to take next: Close Brothers Finance Claims: Are They Refunding and Who Can Claim?.

MotoNovo Finance is another major lender under scrutiny as part of the car finance scandal. Many customers have discovered they paid more than necessary because of hidden commissions or lack of proper disclosure. For guidance on whether you can recover money and how to make your case, see: Understanding MotoNovo Finance Claims: Can You Get a Refund?.

Other lenders also facing scrutiny include:

• Vauxhall Finance Claims: Can You Get a Refund? – Refunds may be due to customers on agreements that contained undisclosed commission or overcharged rates.
• BMW Finance Claims: How to Get Compensation for Mis-Sold Agreements – Drivers may be able to claim compensation if mis-sold PCP or HP agreements.
• Audi Finance Claims: Are You Owed a Refund? – Borrowers could recover money if hidden fees or commissions were not properly disclosed.
• PSA Finance Claims: How to Recover Overpaid Charges – There might be claims where they overcharged their customers because they had engaged in unfair finance practices.
• Barclays Car Finance Claims: Can You Get Compensation? – Compensation may be available where agreements were mis-sold or commission wasn’t explained.
• Santander Car Finance Claims: Can You Get a Refund? – Customers may seek refunds if they were mis-sold or charged inflated interest.
• Alphera Finance Compensation: What to Do if You Were Mis-Sold a Car Finance Deal – Borrowers may be eligible for redress if agreements weren’t transparent.
• Blue Motor Finance Claims: Are You Owed a Refund for Mis-Sold Car Finance? – Refunds could be available where unfair lending practices occurred.
• CA Auto Finance Claims: What You Need to Know About Claims and Compensation – Customers may be able to claim if their agreements were mis-sold.
• Clydesdale Finance Claims and the Car Loan Commissions Scandal: Can You Claim Compensation? – Borrowers may recover compensation if unfair commission structures were applied.
• Honda Finance Claims: Can You Recover Money from a Mis-Sold Agreement? – Drivers may be owed refunds if their finance deal was mis-sold.
• Hyundai Finance Claims and Agreements Under Review: Can You Claim Compensation for Mis-Sold Deals? – Claims may be possible where unfair charges or hidden fees were included.
• Mercedes Finance Claims: Are You Owed Compensation for Mis-Sold PCP Deals? – Compensation could be available for mis-sold PCP agreements.
• Northridge Finance Claims: Could You Be Owed a Refund for Mis-Sold Car Finance? – Borrowers may have a case if their agreement was not transparent.
• Toyota Finance Claims: Were You Mis-Sold a PCP or HP Deal? – In the case of unfair conditions or hidden commissions, the money can be refunded.
• Volkswagen Finance Claims: How to Recover Hidden Fees and Overpayments – Customers may be entitled to recover money from undisclosed fees or commissions.

These lender-specific claims highlight the importance of checking your agreement, even if you dealt with a well-known company. Each lender has slightly different procedures for handling complaints, but your rights as a consumer remain the same. By taking action promptly, you can ensure your claim is considered fairly and increase your chances of receiving compensation.

Latest Updates on Car Finance Scandal in the UK

Litigation in the area of car finance claims is gathering pace. The Supreme Court handed down a ruling last August 1, 2025 [3] but instead of triggering another flood of payments, it limited compensation in most cases.

So, what has happened to date?

• The FCA banned DCAs in January 2021 [4], but claims are still being processed for pre-ban agreements.

The FCA identified DCAs as harmful to consumers because they encouraged brokers and dealers to inflate interest rates. As a result, the FCA banned these arrangements for all new agreements starting January 2021. However, if you entered into a car finance agreement before that date, and a DCA was involved, you may still be entitled to compensation. Claims are currently being reviewed for agreements dating as far back as 2007, with many customers finding they overpaid without realising.

• The FOS has upheld several complaints [5], finding that customers paid excessive interest due to undisclosed commissions.

One of the key areas in which the FOS has made a real impact has been in relation to complaints about mis-sold car finance. This has, in a number of cases, worked in favour of the customer. There have been decisions that lenders and brokers did not disclose the size of the commissions to customers and that customers overpaid. These decisions have set important precedents and put pressure on lenders to review and settle complaints speedily and fairly.

• Thousands of complaints are pending, with some lenders setting aside funds [6] in anticipation of payouts.

Since the FCA and FOS began investigating these issues, a surge of complaints has been filed against major lenders. Many lenders have acknowledged the scale of the problem and have already earmarked substantial reserves to cover expected compensation payments. These provisions indicate that lenders recognise their exposure and the likelihood of significant settlements following the SC’s decision.

• Legal experts now say the Supreme Court ruling [7] has provided some clarity, but not a sweeping mandate, on whether lenders must proactively compensate customers affected by mis-sold car finance.

The Court upheld only one of the three cases it reviewed, siding with consumer Marcus Johnson due to the specific unfairness in his agreement with the South African lender FirstRand (trading as MotoNovo in the UK). This has set a potential precedent where certain forms of commission arrangements may be deemed legally unfair. However, the ruling did not broadly compel all lenders to review and refund customers automatically. It has instead placed the burden of broader compensation decisions on the Financial Conduct Authority (FCA), which will now decide whether a formal redress scheme should be created.

• The Financial Conduct Authority has formally responded to the Supreme Court ruling. Just last October 7, 2025, the FCA published an official consultation paper [8] outlining its proposal for a motor finance compensation scheme. 

The consultation, open until November 18, 2025, seeks views on a redress scheme that would compensate consumers who were charged excessive interest due to commission-related practices. The FCA also proposed extending the deadline for firms to issue final responses to certain motor finance complaints to 31 July 2026, allowing sufficient time for affected customers to be included in the redress process.

The FCA has calculated that redress under this scheme would average £700 per agreement [9]. Total payouts could be £8.2 billion depending on take up, though individual amounts will vary based on the specifics of each agreement. The FCA intends to engage widely with stakeholders, including consumers, motor dealers, and finance providers.

If you think you were mis-sold a car finance deal, it is important to keep up to date with these developments. Each new decision and announcement brings the industry one step closer to processing claims and treating consumers fairly. To keep abreast of the latest news, you can follow this updated resource: Latest Updates on Car Finance Claim Settlements in the UK.

From PPI to Car Finance: The Next Multi-Billion-Pound Scandal?

The car finance scandal is already being compared to the notorious PPI mis-selling debacle, which resulted in billions of pounds in compensation to UK consumers. While PPI involved payment protection insurance sold alongside loans, the car finance scandal centres on hidden commissions and unfair practices within vehicle financing agreements.

Many in the industry see this as the next major compensation wave, potentially dwarfing even the PPI payouts. The FCA has hinted that the same principles of transparency and fairness apply.

For a detailed analysis of how the landscape is shifting from PPI to car finance claims, see: Assessing the Shift from PPI to Car Finance Claims as the Next Multi-Billion-Pound Compensation Wave in the Payment Industry.

Final Thoughts

It’s the biggest car finance mis-selling scandal yet in the UK, and millions of consumers could be in line for hundreds or even thousands of pounds each in redress if they were mis-sold. If you think you might have been one of them, it’s time to dig out your paperwork, read about your rights and start making your claim.

Stay informed on the FCA’s latest October 2025 proposal about car finance compensation and what it could mean for drivers affected by mis-sold agreements.

FCA Car Finance Compensation Proposal

Latest Updates on Car Finance Claim Settlements in the UK

__________

References:

1. hidden commissions - https://www.fca.org.uk/news/press-releases/fca-bans-discretionary-commission-models-protect-consumers   
2. The FCA outlined three types of commission arrangements that could render a finance deal unfair unless the customer had been fully informed - https://www.fca.org.uk/publication/consultation/cp25-27.pdf
3. Supreme Court handed down a ruling last August 1, 2025 - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf  
4. FCA banned DCAs in January 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models
5. FOS has upheld several complaints - https://www.financial-ombudsman.org.uk/decision/DRN-4326581.pdf
6. lenders setting aside funds - https://www.thesun.co.uk/money/36139717/major-bank-car-finance-payout/
7. Supreme Court ruling - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
8. the FCA published an official consultation paper - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
9. The FCA has calculated that redress under this scheme would average £700 per agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-schemee