Updated: 22 May 2026

Originally Published: 10 December 2024

Car finance mis-selling is one of the biggest issues in consumer finance in the UK. Millions of motorists with Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements signed between 2007 and 2024 are questioning how they were treated when they arranged finance at dealerships and through brokers.

Regulatory investigations, court rulings, Financial Ombudsman Service complaints and rising public awareness have turned what was a niche area into a nationwide car finance scandal in the last two years. Consumers are starting to understand that dealers and brokers may have been paid hidden commissions, charged inflated interest rates and may not have explained important terms of finance agreements.

As of May 2026, the Financial Conduct Authority has already introduced its formal FCA redress scheme framework following the announcement made on 30 March 2026 [1]. The scheme was introduced after years of complaints relating to discretionary commission arrangements (DCAs), undisclosed commissions, and wider concerns about unfair relationships within car finance agreements.

This means consumers across the UK are actively looking to claim car finance compensation, check old agreements, and understand whether they could be entitled to a car finance refund.

If you had a PCP or HP agreement arranged through a dealership, this guide explains who may be eligible to claim car finance compensation, how PCP claims and PCP refund work, what the FCA redress scheme means in practice, and how to start a car finance refund check.

If you are unsure where to begin, you can start with a free PCP claims checker to see whether your agreement may qualify.

What Is the Car Finance Scandal?

The car finance scandal is about the claims that millions of motorists were not given transparent or fair information when taking out car finance. The majority of complaints concern hidden commissions, discretionary commission arrangements (DCAs), over-inflated interest rates, weak affordability checks, or poor transparency of total cost of borrowing.

The issue gained national attention after the FCA began investigating discretionary commission arrangements. Under these models, brokers and dealerships could increase a customer’s interest rate to earn more commission from lenders.

Many customers say they were never told this was happening.

The FCA banned DCAs in January 2021 [2] because of the conflict of interest they created. Since then, complaints about undisclosed commissions and unfair finance relationships have continued to grow.

Consumers wanting a deeper explanation of how the issue developed can read more about the wider major consumer scandal affecting the UK motor finance industry.

Why So Many Drivers Are Now Making PCP Claims

Car finance became the dominant way to buy vehicles in the UK during the 2010s, especially through PCP agreements.

Monthly payments often looked affordable, but many customers focused only on the repayment amount rather than the total borrowing cost or how dealerships were being paid.

As complaints mounted, regulators noticed broad issues around commission disclosure, lender supervision, and the fairness of the way certain financial products were being sold. That has led to a big jump in PCP finance claims and car finance claims across the UK.

Who Can Claim Car Finance Compensation?

You can claim car finance compensation if you took out a PCP or HP agreement between 2007 and 2024.

This includes new and used vehicle finance, dealer arranged agreements, broker introduced finance, and refinanced products.

You may still qualify even if the agreement has already ended, the vehicle was sold or repossessed, you refinanced later, or you no longer have the paperwork.

Many people wrongly assume they cannot make a car finance claim because the agreement finished years ago.

In reality, historic agreements remain at the centre of current investigations.

FCA Eligibility Criteria for Car Finance Mis-Selling

Under the FCA redress scheme announced on 30 March 2026, a relationship will be presumed unfair where there was inadequate disclosure of one or more specific commission arrangements.

The main eligibility categories are:

• Discretionary commission arrangement (DCA) where the broker was able to vary the interest rate offered to a customer in order to get a higher commission
• High commission arrangement where the commission was 39% of the total cost of credit and 10% of the loan
• Contractual ties that provide a firm with exclusivity or a right of first refusal, except where the lender can demonstrate that there were visible links between the lender, the manufacturer and the franchised dealer

These are the key types of car finance mis-selling now recognised within the FCA car finance redress framework.

The FCA has also set out circumstances where a case may be considered fair.

These include:

• The commission was £120 or less for agreements beginning before 1 April 2014
• The commission was £150 or less for agreements beginning on or after 1 April 2014
• The borrower was not charged interest
• The DCA was not used to earn additional commission
• The lender can prove it was fair not to disclose one of the relevant arrangements
• The lender can prove the consumer did not suffer any loss
• A contractual tie did not operate in practice
• No better deal was available to the consumer

Consumers should remember that eligibility depends on the individual facts of each agreement, the type of commission arrangement, and whether the lender can rely on one of the FCA’s stated exceptions.

Common Reasons for PCP Claims and Car Finance Claims

Many relate to undisclosed or excessive commissions, high interest rates, weak affordability checks or a lack of clear explanation during the sales process.

Some claim they were never informed a dealership would be paid commission by the lender. Others say they paid more in interest as dealers could mark up rates on discretionary commission arrangements.

There are also complaints involving PCP balloon payments, where customers say the final payment structure was not explained properly before signing.

You can read more about discretionary commission arrangements (DCAs) and other undisclosed commissions and how these practices may affect compensation.

What Has Happened Since 2024?

There have been a number of regulatory and legal developments in the UK car finance industry in the last two years. The FCA issued a notice of formal investigation into discretionary commission arrangements and subsequently introduced its formal redress scheme in March 2026. Court rulings in 2024 and 2025 have also placed further emphasis on the issues of undisclosed commissions and the extent of pre-contract disclosure to consumers prior to entering into a finance contract. In the meantime, a number of lenders have made significant financial provisions in anticipation of future claims.

Which Agreements Could Be Affected?

The majority of complaints are regarding PCP agreements, Hire Purchase agreements, dealer arranged finance and broker introduced finance. Agreements that may be able to be reviewed are any signed between 2007- 2024 subject to the lender, the commission structure and how the agreement was sold. Although discretionary commission schemes have been banned since January 2021, there are still mis-selling complaints such as undisclosed commissions, unfair relationships, misrepresentative disclosures and other car finance mis-selling can still apply to contracts signed after the ban.

What Is a PCP Claim?

A PCP claim is a complaint relating to a Personal Contract Purchase agreement.

PCP agreements became extremely common because they offered lower monthly payments compared with traditional finance.

A typical PCP deal involved a deposit, monthly repayments, interest charges and a large balloon payment at the end of the term.

Drivers could hand back the car, make the balloon payment and keep the vehicle, or take any equity left over into a new car.

The issue was not the structure of PCP.

The issue was how many agreements were sold.

Many PCP claims now focus on whether customers were given fair, transparent, and accurate information before signing.

You can read more about car finance mis-selling and the most common complaint categories.

How to Start a Car Finance Refund Check

If you think your agreement may have been affected, the first step is completing a car finance refund check.

This usually involves questions about the lender, the dealership, the agreement dates, whether commission was discussed, and whether affordability checks were carried out properly.

A PCP claims checker can provide an early indication of whether your agreement may fall within the scope of current investigations.

Many consumers start with a claims checker before gathering paperwork.

What Documents Do You Need?

You do not always need every document to begin a car finance claim.

Helpful documentation include finance agreement, vehicle registration information, settlement letters, monthly statements, dealership email, payment proof.

You can request information from the lender if you no longer have your agreement.

How to Claim Car Finance Compensation

Step 1: Read your agreement

Look for the APR, any mention of commission, the total payable, the balloon payment and the explanation of the finance when it was sold to you.

Step 2: Spot potential mis-selling issues

Did you understand the commission was paid? Were affordability checks correctly done? Did you understand the structure of the final payment before you signed the agreement?

Step 3: Submit a complaint

You can complain directly to the lender.

Your complaint should explain why you believe the agreement was unfair, what information was missing, and whether you suffered financial loss as a result.

Step 4: Escalate if necessary

If the lender dismisses your complaint you may be able to take the case to the Financial Ombudsman Service at a later date.

Using Claims Management Companies

Some drivers prefer to make a complaint by themselves. Others get help from a claims management company, which is a business that is regulated by the Financial Conduct Authority.

The companies are experts in finance claims and will gather the evidence, help with submitting the complaint and deal with the lender on your behalf.

Should you wish to use professional support then this guide to claims management companies tells you what to expect.

How Much Car Finance Compensation Could You Receive?

Compensation amounts vary depending on:

• The size of the agreement
• The interest charged
• The type of commission involved
• The level of financial loss
• Whether the complaint caused wider harm

Potential compensation categories

Consumers may receive compensation for:

• Excess interest paid
• Hidden commissions
• Additional fees
• Financial losses
• Distress and inconvenience
• Credit file damage

Example of inflated interest

A consumer paying a significantly higher interest rate because of a discretionary commission arrangement may have overpaid hundreds or thousands of pounds.

Longer agreements and higher borrowing values often increase the potential refund.

Credit file corrections

Where unfair finance contributed to arrears or defaults, successful complaints may also support credit file amendments.

Compensation estimates

Industry analysts have estimated that total sector wide compensation could eventually reach £9.1bn [3].

FCA and industry estimates presented at the 2026 roll-out of the redress scheme suggest that the average car finance refund to many affected agreements could be around £829 [4]. Some consumers may be entitled to considerably more, depending on the value of the agreement, the interest paid, and the type of commission involved.

Some individual agreements may result in modest refunds.

Others could lead to significantly larger payouts 2026 depending on the circumstances.

Which Lenders Are Most Commonly Linked to Complaints?

Complaints related to car finance mis-selling cover a wide variety of lenders throughout the UK motor finance industry. Below is a selection of lender names most commonly associated with PCP claims and car finance claims:

Alphera Finance claims (BMW Group) typically relate to premium vehicle finance agreements, arranged through franchised dealerships and broker networks. Read more.

Audi Finance claims are generally PCP products originated from Audi Dealers and managed through Volkswagen Financial Services. Read more.

Barclays Finance claims are vehicle loans and personal finance agreements linked to dealerships throughout the UK and offered through partner networks. Read more.

Black Horse is one of the most frequently searched lenders due to its significant involvement in the UK car finance sector throughout the PCP boom period. Read more.

Blue Motor Finance claims usually involve broker introduced agreements or used car finance products which have been arranged through independent dealers. Read more.

BMW Finance claims are for finance agreements set up for BMW consumers and relate to PCP and Hire Purchase products arranged through approved dealerships. Read more.

CA Auto Finance claims generally pertain to agreements associated with Fiat, Jeep, Alfa Romeo and other vehicle manufacturers formerly part of FCA Automotive Services. Read more.

Close Brothers claims are usually related to legacy dealer arranged motor finance agreements and involve commission. Read more.

Claims made against Clydesdale Bank usually relate to car finance agreements supplied through a dealer and intermediary network. Read more.

Honda Finance claims usually relate to finance agreements set up for Honda customers through manufacturer linked lending programmes. Read more.

Hyundai Finance claims usually relate to PCP and HP products supporting new and approved used Hyundai car purchases. Read more.

The majority of Mercedes Finance claims are made against high value PCP agreements that have been arranged with Mercedes-Benz dealers around the UK. Read more.

MotoNovo claims mostly relate to used vehicle finance agreements that have been arranged with independent dealers and brokers. Read more.

Northridge claims relate to motor finance products sold by dealers and supported by Bank of Ireland UK. Read more.

PSA Finance claims relate to a high volume of agreements arranged with Peugeot, Citroen and Vauxhall dealerships before the wider Stellantis restructuring. Read more.

Santander car finance claims are more visible as Santander Consumer Finance supported a large proportion of UK vehicle lending at the time that now falls under FCA investigation. Read more.

Toyota Finance claims refer to a volume of dealership arranged PCP and Hire Purchase agreements linked to Toyota and Lexus vehicles. Read more.

Vauxhall Finance claims typically involve dealer finance products backed through the Stellantis affiliated finance arm. Read more.

Volkswagen Finance claims account for high volumes of PCP contracts across Volkswagen, Skoda, SEAT, CUPRA and associated dealership marques. Read more.

The FCA has not said that every one of these lenders was unfair in every agreement. However, firms across the market either ran discretionary commission arrangements before they were banned in 2021 or worked via dealer networks where commission disclosure practices are now facing more scrutiny.

As a result, millions of motorists are reviewing older agreements and checking whether they may qualify for car finance compensation under the FCA redress scheme.

What If You Already Complained?

Many consumers submitted complaints during 2024 and 2025.

If you already complained:

• Your complaint may still be under review
• Your lender may still be awaiting FCA guidance
• Your case may eventually fall within a wider compensation scheme

It is important to keep copies of all correspondence.

You should also monitor ongoing car finance complaints updates because the regulatory position continues to evolve.

The FCA Redress Scheme in 2026

On 30 March 2026, the FCA formally confirmed its industry wide motor finance redress scheme through Policy Statement PS26/3 [5].

The purpose of the scheme was to provide redress to consumers who could have been affected by unfair relationships, including issues caused by undisclosed commissions, discretionary commission arrangements, high commission structures and tied lender arrangements.

The FCA estimates that around 12.1 million agreements taken out between 6 April 2007 and 1 November 2024 could potentially fall within scope.

The regulator also estimated that the industry wide redress scheme could result in approximately £7.5 billion in compensation being paid to consumers.

Scheme 1 and Scheme 2 explained

The FCA split the redress programme into two separate schemes.

Scheme 1

Scheme 1 covers agreements entered into between 6 April 2007 and 31 March 2014.

This period falls before the FCA formally took over consumer credit regulation.

Under the FCA timetable:

• Firms must implement Scheme 1 by 31 August 2026
• Consumers who have already made a complaint should receive an outcome within 3 months of scheme implementation
• Average estimated redress figure for Scheme 1 cases has been reported as c. £734 per agreement

Scheme 2

Scheme 2 covers agreements entered into between 1 April 2014 and 1 November 2024.

This covers the period after the FCA became the consumer credit regulator.

Under the FCA timetable:

• Firms must implement Scheme 2 by 30 June 2026
• Consumers who already complained should receive an outcome within three months after implementation
• Average estimated redress for Scheme 2 cases has been discussed at approximately £881 per agreement

The FCA has also discussed an overall average estimated refund figure of approximately £829 per eligible agreement across the wider redress scheme.

Some cases involving particularly high commission arrangements may receive substantially more compensation depending on the level of commission, APR impact, and financial loss.

The FCA expects most compensation payments across the scheme to be completed by the end of 2027, although ongoing legal challenges may affect timelines.

Consumers who believe they may have been affected by car finance mis-selling are still encouraged to submit complaints and complete a car finance refund check as early as possible.

Why Acting Early Still Matters in 2026

Many drivers are choosing to begin a car finance claim now rather than waiting for further FCA announcements.

Submitting a complaint creates a formal record, helps preserve evidence, and may reduce delays once compensation payments accelerate across the industry.

With millions of agreements potentially falling within scope, many experts expect significant backlogs during the wider redress process.

Common Myths About Car Finance Claims

Many motorists think they can't complain because they signed the agreement or finished paying years ago. In fact, historic agreements can still qualify if there were hidden commissions or unfair lending practices.

Another common misunderstanding is that only PCP agreements are affected. Both PCP and HP products may potentially fall within the FCA redress scheme depending on how the finance was arranged.

What Makes a Strong Car Finance Claim?

The strongest complaints typically have evidence of non-disclosed commissions, very high interest rates or poor affordability checks/poor disclosure in the sales process.

But all car finance claims are different and turn on their own facts, and the commission arrangement in question.

How Finance Claims Experts can assist

Finance claims experts can assist consumers in reviewing the agreement, to see whether there may be commission issues and how the FCA redress scheme may apply to their case.

Consumers should always ensure any claims management company they use is properly regulated.

How the Car Finance Industry Has Responded

Reaction to the FCA redress scheme, first announced in March 2026, has been mixed throughout the motor finance sector. Some increased the size of their complaint handling teams and made financial provisions for redress in anticipation of compensation payouts. Others reviewed historic commission structures, dealership partnerships and internally-generated sales linked to PCP and HP.

Several firms have also challenged aspects of the FCA redress scheme through legal action. Consumer Voice, alongside three motor finance lenders, launched proceedings questioning parts of the FCA’s proposed approach and compensation framework [6].

Despite those challenges, the wider industry remains under intense scrutiny from regulators, consumer groups, the courts, and the media as the redress process continues to develop through 2026 and 2027.

The Wider Impact on UK Consumers

The car finance scandal has raised wider concerns about transparency, dealer incentives, and trust within the motor finance industry.

For some motorists, the financial impact may have been relatively small. For others, higher borrowing costs may have contributed to longer term financial pressure.

Should You Make a Car Finance Claim Yourself?

Some drivers like to deal with their complaint on their own, while others prefer to have the support of professionals in the form of finance claims experts.

It really depends on how complicated the agreement is, how much paperwork you have and how comfortable you feel doing it yourself.

Final Thoughts on Claiming Car Finance Compensation in 2026

The FCA redress scheme has transformed debate around mis-sold car finance.

Millions of motorists are reviewing agreements signed between 2007 and 2024, to assess if hidden commissions, high interest rates or unethical sales practices pushed up the cost of their borrowing.

The FCA has calculated that there could be over 12 million agreements in scope. Current estimates for average redress stand at around £829 per eligible agreement.

If you think you may be affected you can initiate a car finance refund check now in order to see if you might be eligible to claim compensation.

Consumers seeking a more general picture of car finance mis-selling and current car finance complaints can continue to track FCA guidance as the redress program rolls out in 2026 and 2027.

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References:

1. As of May 2026, the Financial Conduct Authority has already introduced its formal FCA redress scheme framework following the announcement made on 30 March 2026 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
2. The FCA banned DCAs in January 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models
3. Industry analysts have estimated that total sector wide compensation could eventually reach £9.1bn - https://www.fca.org.uk/publication/policy/ps26-3.pdf
4. the average car finance refund to many affected agreements could be around £829 - https://www.bbc.com/news/live/czx94evl5lrt
5. On 30 March 2026, the FCA formally confirmed its industry wide motor finance redress scheme through Policy Statement PS26/3 - https://www.fca.org.uk/publication/policy/ps26-3.pdf
6. Consumer Voice, alongside three motor finance lenders, launched proceedings questioning parts of the FCA’s proposed approach and compensation framework - https://www.theguardian.com/business/2026/may/01/fca-legal-challenges-compensation-scheme-car-loan-motor-finance