Updated: 15 October 2025

Originally Published: 16 April 2025

Introduction: Why Consumer Rights Matter Now

For millions of UK drivers, buying a car on finance is almost a rite of passage. Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements have long promised manageable monthly payments, predictable terms, and the option to own the car outright at the end. For many, it felt like the simplest way to get behind the wheel of a new vehicle without handing over a lump sum.

What looked straightforward on the surface often hid a more complicated and less fair reality. Between 2007 and 2024, countless consumers were steered into deals that were not explained properly. Many paid far more than necessary. Interest rates were quietly inflated. Balloon payments were glossed over. Dealers and brokers pocketed commissions without telling the customer.

These practices have now snowballed into one of the largest financial scandals in modern UK history. The car finance scandal UK consumers are dealing with in 2025 is substantial. The car finance FCA response indicates that around 14 million agreements may have been mis-sold, and the FCA’s consultation proposes a national redress scheme covering regulated agreements taken out between 6 April 2007 and 1 November 2024. On the FCA’s central estimate, average consumer redress would be around £700 per agreement [1], with an indicative industry total of about £8.2 billion at 85 per cent participation. The FCA also models a range of £6.8 billion to £9.7 billion depending on take-up.

In August 2025, the Supreme Court confirmed that keeping commission payments secret can still create an unfair relationship under the Consumer Credit Act [2]. The judgment narrowed some legal arguments, but it reinforced an important point. Where secrecy or excessive commissions exist, consumers retain a meaningful route to challenge.

At the same time, the FCA has opened its consultation (October 2025) [3] and is consulting on extending the deadline for firms to provide final responses on motor finance complaints to 31 July 2026. The FCA will confirm by 4 December 2025 whether that extension will apply. The consultation on the redress scheme itself closes on 18 November 2025, with final rules expected in early 2026 and payments later in 2026 once the scheme launches. There is no extension for motor leasing complaints, and firms must begin sending final responses on those from 5 December 2025.

For consumers, the moment to act is now. Understanding your rights, knowing what warning signs to look for, and preparing your case will be vital. Those who wait for headlines may still benefit, but those who act early are likely to be nearer the front of the queue.

This guide sets out:

• Your key rights under UK law
• The most common problems in car finance agreements
• How to recognise signs of mis-selling in 2025
• Practical steps to take if you think you were misled
• How the redress process is shaping up this year
• Routes available to pursue a claim, including claims management companies, solicitors, and DIY

1. Your Rights Under UK Law

British consumer law makes sure finance products are just and not designed to leave people in debt. The key legislation governing car finance is the Consumer Credit Act 1974 (CCA) [4], the Consumer Rights Act 2015 (CRA) [5] and the rules of the Financial Conduct Authority (FCA). Those safeguards are in place to protect drivers from unfair contracts and poor sales practices.

Four rights that matter most to anyone with a PCP or HP agreement:

1.1 Right to Transparent Information

You should never be left guessing about the true cost of your car finance. The CRA 2015 and the FCA's Consumer Credit Sourcebook (CONC) [6]  both require that information is accurate and not misleading. That means you deserve to compare options and make an informed decision before you sign.

What this looks like in practice:

Full cost breakdown

You should see the total amount repayable over the full term. That means the car price, deposit, interest rate shown as APR, all fees, and potential penalties. If only a monthly figure is emphasised, ask for the total cost and a written breakdown.

Repayment schedule

You should understand how many payments you will make, how much each payment is, and how those payments reduce the balance. A good schedule shows how much is interest and how much is capital.

Commission disclosure

If the dealer or broker receives money from the lender, you should be told in a way that helps you understand what it is, who pays it, and whether it could affect the rate you are offered.

Balloon payment and GFV on PCP

The final lump sum should be explained clearly at the start. You should know the amount, when it is due, and your choices at the end. If you were not told that a large final payment would be required to own the car, that lack of clarity is a serious issue.

Clarity on finance type

PCP, HP, and personal loans all work differently. A fair presentation compares like for like. You should be shown the pros and cons of each option, not just the one that is most profitable for the dealer.

Quick self-check:

• Did you get a written quotation with APR, fees, and total repayable?
• Were you told about any commissions in plain terms?
• Was the salesperson able to explain the end-of-term options and balloon amounts?
• Were HP and PCP compared fairly?

If you answered no to one or more, you may have missed transparency.

1.2 Right to Fair Terms

Car finance should never be loaded with hidden catches or one-sided clauses. The Consumer Credit Act 1974 gives courts the power to intervene in “unfair relationships,” while the Consumer Rights Act 2015 bans unfair contract terms altogether..

Fair terms mean:

• No hidden charges at the midway or the end.
• No pressure sales or artificial deadlines.
• Checks for real affordability before approval.
• Reasonable early settlement terms are in writing.

Fairness checklist:

• Were costs added that you never agreed to?
• Were you pressured to sign immediately?
• Did anyone actually check your budget and existing commitments?
• Were early settlement terms written?

If the answer to these is not clear, the terms may be unfair.

1.3 Right to Cancel (Cooling-Off Period)

If you change your mind, you’re not stuck. The Consumer Credit Act 1974 (s.66A) [7] gives you a 14-day cooling-off period to cancel a regulated credit agreement.

Key points:

• There is no need to give a reason
• If you picked up the car, you repay the borrowed amount and return it
• Every deposit has to be treated according to the agreement, but you should not be penalised for exercising this right
• This right defends you against rush choices and hard-sell tactics.

1.4 Right to Complain and Seek Redress

Think your finance was mis-sold? You don't have to live with it. You can challenge it under the Consumer Credit Act 1974, the FCA DISP rules [8] and the Financial Ombudsman Service (FOS) [9].

The usual route:

Complain to the lender

Set out what happened, why you believe the agreement was mis-sold, and what outcome you want.

Escalate to the Financial Ombudsman Service

If you are unhappy with the lender’s final response once the pause lifts, the Ombudsman can assess the complaint and require the lender to put things right.

FCA redress scheme

If a mass scheme proceeds, eligible complaints may be processed in bulk under consistent rules guided by FCA car finance policy.

You do not need to be a legal expert to complain. You only need to explain clearly what went wrong and provide any evidence you have.

2. Common Problems in Car Finance Agreements

Car finance can be convenient, but the way the products were sold created unfair outcomes for many. Below are the issues that crop up most often.

2.1 Hidden Fees and Commissions

The central issue is undisclosed commission. Many dealers and brokers were paid by lenders for arranging finance. In some cases, the size or structure of that commission influenced the interest rate you were offered.

Discretionary commission arrangements

Under DCAs, the dealer could increase your interest rate and earn more commission. Customers were usually kept in the dark about this. Rates looked competitive on the forecourt but were higher than necessary.

Other hidden charges:

• Balloon payments on PCP that were not explained properly
• Excess mileage fees that add up quickly
• Early repayment charges that were not highlighted
• End-of-contract wear and tear costs that exceed expectations

How to spot it:

• The monthly payment seemed low, but the total repayable looks very high
• You were told “commission may be paid” but never given meaningful detail
• You were not warned about a balloon payment and only found out at the end

2.2 High Interest Rates Not Properly Explained

A deal can feel comfortable month to month and still cost more than it should over the full term. That usually happens when the headline looks appealing but the detail tells a different story.

What this looks like in real life:

• You were shown a neat monthly figure and a low-sounding rate, then later discovered the APR that includes fees was much higher.
• The interest rate you were given does not match your credit history. Friends with similar scores paid less, yet no one explained why your rate was higher.
• The term was stretched to keep payments down, which made the total interest grow quietly in the background.

Simple checks you can do today:

• Find the APR on your agreement. Ignore the sales pitch rate and focus on the APR because it includes fees.
• Sense check the rate against your credit standing. If you had a solid score, a premium rate needs a good reason.
• Work out the total you will repay and compare it with the total on a shorter term. A slightly higher monthly payment can sometimes save thousands overall.

If numbers feel overwhelming:

• Ask the lender or your representative for a simple one-page breakdown that shows total cost, fees, and how much is interest.
• Use a basic online loan calculator to model alternatives. Seeing two totals side by side often makes the problem obvious.

2.3 Balloon Payments and End-of-Term Surprises

PCP can be a smart choice if you like to change cars regularly. It only works well if the end is explained as clearly as the beginning.

Common pitfalls to avoid:

• No one discussed the balloon payment in a way that helped you plan for it, so the figure at the end felt like a shock.
• You assumed you would own the car automatically, but you actually need to pay a large lump sum to keep it.
• Mileage and condition charges were barely mentioned, so the return appointment came with unexpected costs.

What good practice looks like:

• The balloon amount is shown in writing at the start, alongside the total you will have paid by the time you reach it.
• Your choices are set out in plain English: pay the balloon and keep the car, hand the car back and walk away within the mileage and condition limits, or part-exchange and roll any equity into the next deal.
• You receive clear guidance on fair wear and tear and the price per extra mile, so you can budget and drive accordingly.

How to stay in control:

• Put a reminder in your calendar six months before the end date to review options calmly rather than at the last minute.
• Ask for an early settlement figure and a written return checklist.
• If you are likely to exceed the mileage cap, calculate the expected charge now and factor it into your decision, rather than being caught out on hand-back day.

2.4 Dealers Pushing Unsuitable Products

Sales targets and commission structures led some dealers to push PCP when HP or a personal loan would have been a better fit.

Watch for:

• You wanted to own the car from day one, but were steered into PCP
• You could have paid outright, but finance was pushed as the only sensible option
• The car price on finance seems higher than the price for cash

2.5 Misleading Affordability Assessments

Affordability checks should protect you. In too many cases, they were a tick-box exercise.

Signs the checks were weak:

• Payments quickly consumed a large share of your disposable income
• You repeatedly juggled bills to keep up with the car
• You refinanced mid-term and the overall cost rose sharply

3. Recognising Mis-selling: What the FCA Consultation Says

The FCA proposes that an agreement may be presumed unfair if at least one of the following features applied and was not adequately disclosed to you. These rules cover regulated car finance taken out between 6 April 2007 and 1 November 2024 where a lender paid commission to a broker or dealer.

1) Discretionary Commission Arrangements (DCA)

The broker or dealer could adjust your interest rate. A higher rate often meant a higher commission for them. Most customers were not told this clearly, which meant they could not shop around or negotiate with full knowledge.

Signs this might apply to you

• Your APR felt high for your credit profile, and the dealer seemed to control the final rate.
• You were not told that changing the rate could change the broker’s commission.

2) High Commission Arrangements

The FCA treats commission as “high” when it met both of these thresholds:

• 35% or more of the total cost of credit, and
• 10% or more of the loan amount.

At this level, the commission likely influenced price and should have been clearly explained.

Signs this might apply to you

• You were told little or nothing about commission.
• The total repayable looks out of line with comparable quotes you later obtained.

3) Contractual Ties or Exclusivity

The broker had an exclusive or near-exclusive arrangement with one lender or a very small panel. Customers were sometimes told they were getting the best deal when their options were limited in practice.

Signs this might apply to you

• Only one lender was offered without a real explanation.
• The broker described a wide market search that, in reality, did not occur.

Important clarifications from the consultation [10]

• Presumption of missing evidence: Where there is no reliable evidence of what was said, lenders must assume inadequate disclosure.
• Serious “Johnson-type” cases: If there was an undisclosed contractual tie and a very high commission of at least 50% of the total cost of credit and 22.5% of the loan, compensation under the scheme could be the full commission plus interest.
• What is out of scope: Leasing is not covered by the unfair relationship legislation in the same way, so it is not part of the proposed scheme.
• Dates: The proposed scheme covers agreements from 6 April 2007 to 1 November 2024. DCAs were banned for new business from 2021, but earlier agreements are in scope.

When a lender might try to rebut the presumption

The FCA proposes limited situations where a lender could argue there was no unfairness, for example:

• Adequate disclosure can be proven with contemporaneous records.
• In DCA-only cases, there is credible evidence the broker actually selected the lowest rate at which no extra commission would be earned.
• The customer was sufficiently sophisticated to have understood the arrangement even if disclosure fell short, supported by evidence.

Quick self-check you can include in a complaint

Tick any that apply:

• I was not told that the dealer could change my interest rate or earn more by setting it higher.
• I was not told how large the commission was or how it could affect my rate.
• I was presented with one lender as if it were the only option, despite talk of a market search.
• The balloon amount, mileage charges or total cost of credit were not explained clearly at the start.

If you ticked one or more, describe what you were told at the time and attach any paperwork or messages you still have. If you prefer support, a regulated claims management company or solicitor can help structure this for you.

4. What To Do If You Suspect Mis-Selling

Taking action can feel daunting. But breaking the process into simple steps makes it manageable and helps you build a stronger case.

4.1 Review Your Contract

Start with the paperwork you have. If you cannot find it, ask the lender for a copy of your agreement and any related documents. They should be able to provide these.

What to check:

• APR, fees, and total repayable
• Commission disclosure wording
• Amount of balloon payment at the end and options available
• Mileage limits and charges
• Early settlement terms

Tip: Compare what is written with what you heard. Note any differences.

4.2 Gather Evidence 

Evidence helps you tell a story and may reduce your chances of getting your complaint dismissed.

Useful items:

• Your contract and any schedules or addenda therein
• E-mails and texts with the dealer or broker
• Sales brochures or finance illustrations that you were provided
• Dates and names of conversations noted
• Your credit report from the time, if you still have it

You do not need everything on this list. Gather what you can and keep it in one place.

4.3 Keep a Record

Create a quick timeline that outlines:

• When you took finance.
• Key things said or not said.
• When you first realised something was wrong.
• Any steps taken to challenge the agreement.

This timeline helps you write your complaint and then escalate if you need to.

4.4 Draft Your Complaint

Write to the lender when you are ready. Keep it factual and simple.

Helpful structure:

• Who you are and the details of the agreement.
• What happened at the point of sale.
• What you were not told and what was misleading.
• Why that matters for fairness or affordability
• What outcome you want, such as refund of overpaid interest, repayment of undeclared commissions, removal of unfair credit markers, consideration for distress where appropriate.

Keep a copy of everything you send.

5. How Redress Works in 2025

The formal process is evolving, but several key points are now clear.

• FCA consultation and timing
• The FCA consultation is open now and closes on 18 November 2025.
• The FCA expects to publish final rules in early 2026, with the scheme launching at the same time and compensation later in 2026.

Complaint handling timing

The FCA is consulting on extending the deadline for final responses to 31 July 2026 for motor finance complaints.

The FCA will confirm by 4 December 2025 whether the extension applies.

There is no extension for motor leasing complaints. Firms must begin sending final responses on those from 5 December 2025.

Scale and participation

Around 14 million agreements may be in scope [11].

The FCA’s central estimate is about £8.2 billion in redress at 85 per cent participation, with a range between £6.8 billion and £9.7 billion depending on take-up.

The average redress is modelled at about £700 per agreement.

What this means for you:

• Submit your complaint now so it is on record
• Expect clarity on timelines following 4 December 2025
• Once rules are set, processing should speed up and become more predictable

6. Options for Action: DIY, Solicitors, or Claims Management Companies

You have three main routes. Choose the one that fits your time, confidence, and paperwork.

6.1 DIY Complaint

Pros: No fee. Full control. You learn exactly what is said and agreed.

Cons: Time-consuming. You need to feel comfortable writing the complaint and keeping on top of correspondence.

Best for: Those who have their documents ready and are confident dealing directly with lenders and, later, with the Ombudsman if needed.

Practical tip: Use a simple template and stick to the facts. Attach key documents and keep a copy.

6.2 Solicitors

Pros: Strong legal expertise. Regulated by the Solicitors Regulation Authority. Useful for complex cases or when you want a legal adviser from the start.

Cons: Fees can be higher than other routes. Not all firms handle car finance claims at volume.

Best for: High-value or complicated agreements, or where litigation might be considered later.

6.3 Claims Management Companies

Pros: FCA-authorised. Often no win, no fee. Handle the process end to end, including evidence gathering and escalation. A good PCP claims company will log your case, obtain documents from lenders, and keep you updated.

Cons: A fee is taken from successful outcomes. Quality varies, so due diligence matters.

Best for: People who have lost paperwork, moved house, or simply want specialists to run the claim and keep it moving. Many consumers prefer to rely on finance claims experts so they do not have to argue the details themselves.

Before you appoint anyone:

• Seek FCA authorisation for claims management companies [12] or SRA status for solicitors [13].
• Ask to see written terms including fees and what happens if you do not win.
• Confirm that you'll have a named contact and regular updates.
• Avoid firms that apply pressure or promise something without reviewing your documents.

Optional first step:

If you would like a quick sense check, many providers offer an online eligibility checker. This gives an initial indication of scope without hunting for every document on day one.

7. Frequently Asked Questions

Can I complain if I finished paying years ago?

Yes. Complaints relate to how the agreement was sold, not whether it is active. Historic agreements remain in scope of the FCA car finance response.

Will complaining affect my credit score?

No. Making a complaint does not harm your credit file. If mis-selling is established, unfair late payment markers linked to an unsuitable agreement may be corrected.

Do I need paperwork to start?

Not always. Begin with what you have. Lenders can often supply copies. A PCP claims company or other specialist can also help trace records using your basic details.

Should I wait for the scheme before complaining?

It is better to submit now so your complaint is logged. Waiting may mean a longer queue once the FCA car finance investigation converts into a live redress programme.

How much compensation might I receive?

The FCA’s modelling indicates an average of about £700 per agreement, with a wide range around that figure depending on loan size, rate and circumstances.

Is motor leasing included?

Leasing complaints are not covered by the same unfair relationship legislation. Firms must begin sending final responses on leasing complaints from 5 December 2025.

Do I need to go to court?

Most cases are expected to be resolved through lenders, the Ombudsman, or an FCA scheme. Court is usually a last resort.

What if the dealer has closed or the lender has changed name?

Responsibility usually sits with the lender or its successor. Corporate changes do not remove your right to complain.

What evidence carries the most weight?

The signed agreement and any pre-contract information, written sales illustrations, emails, or messages showing what you were told, repayment history, and notes on affordability checks.

Can I complain if I never missed a payment?

Yes. Many people were mis-sold even though they never fell into arrears. Mis-selling focuses on fairness and transparency, not only on payment problems.

What if my agreement mentioned that a commission may be paid?

Vague references may not be enough. Effective disclosure should help you understand what the commission is, who pays it, and whether it could influence the rate or product choice.

Can I still hand the car back if I am in a PCP?

That depends on your contract and where you are in the term. Voluntary termination and voluntary surrender are different. Get advice first about costs and credit file implications.

Will a successful complaint remove a default?

If the default resulted from an agreement that is upheld as mis-sold, unfair markers may be corrected. Ask the lender to remove entries that flow from the unfair relationship.

Can multiple agreements be claimed together?

Yes. Include each agreement with dates and references. This is common for drivers who change cars frequently.

How long will the process take?

Timings are affected by the FCA pause. Submitting now ensures your case is logged. Once the scheme begins, many cases should be processed in bulk under consistent rules.

Is the FCA car finance approach the same as PPI?

The principle of mass redress is similar, but the detail will reflect the mechanics of motor finance. The FCA car finance consultation will set out the method for calculating compensation and the route for consumers to receive it.

Where can I find official updates?

Look for announcements on the FCA website and from the Financial Ombudsman Service. Any PCP claims company or finance claims experts like Reclaim247 should also provide clear updates that are consistent with the car finance FCA guidance.

8. Conclusion: Protecting Your Rights in 2025

Car finance should provide access and flexibility, not financial stress. Millions of drivers were sold agreements that were not explained fairly or clearly between 2007 and 2024. Many paid more than they should have, with hidden commissions, high rates, and thin affordability checks.

The Supreme Court has confirmed that secrecy around commissions can be unfair under the law. The FCA is now consulting on a redress scheme that aims to deliver consistent outcomes at scale. Consumers have a meaningful route to seek FCA car finance compensation.

What happens next is partly in your hands. Learn your rights. Check your agreement. Put your complaint on record so it is ready to be assessed when the rules are finalised. Choose the route that works for you, whether that is a do-it-yourself complaint, a solicitor, or FCA-authorised claims management companies that can manage the process on your behalf. If you prefer a guided experience, finance claims experts can keep your case moving while the framework takes shape.

Consumer rights exist for a reason. Use them. Assert them. Make sure the system works in your favour.

_________

References:

1. On the FCA’s central estimate, average consumer redress would be around £700 per agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
2. In August 2025, the Supreme Court confirmed that keeping commission payments secret can still create an unfair relationship under the Consumer Credit Act - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
3. the FCA has opened its consultation (October 2025) - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
4. Consumer Credit Act 1974 (CCA) - https://www.legislation.gov.uk/ukpga/1974/39/section/140A
5. the Consumer Rights Act 2015 (CRA) - https://www.legislation.gov.uk/ukpga/2015/15/contents/enacted
6. FCA's Consumer Credit Sourcebook (CONC) - https://handbook.fca.org.uk/handbook/conc1
7. Consumer Credit Act 1974 (s.66A) - https://www.legislation.gov.uk/ukpga/1974/39/section/66A
8. FCA Disp rules - https://handbook.fca.org.uk/handbook/disp1
9. Financial Ombudsman Service (FOS) - https://www.financial-ombudsman.org.uk/consumers/complaints-can-help/credit-borrowing-money/car-finance/complaints-about-commission
10. clarifications from the consultation - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
11. Around 14 million agreements may be in scope - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
12. FCA authorisation for claims management companies - https://www.fca.org.uk/firms/claims-management
13. SRA status for solicitors - https://www.sra.org.uk/consumers/register/