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  • Writer's pictureMis-sold Car Finance

Mis-sold Car Finance. Are You Due Compensation?


The Financial Conduct Authority (FCA) is investigating discretionary commission arrangements in finance agreements (e.g. hire purchase or PCP) for cars bought before 28 January 2021

  • Discretionary commission arrangements incentivised brokers to increase a buyer’s interest rate over and above that charged by the lender

  • The FCA banned discretionary commission arrangements on 28 January 2021

  • If FCA finds ‘widespread misconduct’ and thinks consumers have lost out, buyers using car finance may be owed compensation

Car PCP deals have hit the headlines amid suggestions buyers could be in line for compensation for paying inflated interest rates on their deals.

This could apply to anyone that bought a car on finance before 28 January 2021 using hire purchase (HP) or a PCP (Personal Contract Purchase) arrangement, if it included a ‘discretionary commission arrangement’ for the broker.

In most cases, the broker is the dealer that sold you the finance (and the car).

Discretionary commission arrangements allowed lenders to incentivise brokers to increase a buyer’s interest rate over and above that charged by the lender.

Banned by the Finance Conduct Authority (FCA) on 28 January 2021, so doesn’t impact cars bought on or since that date.

The FCA is using its powers under s166 of the Financial Services and Markets Act 2000 to review historical motor finance commission arrangements and sales.

Because these discretionary commission arrangements were not illegal at the time, most consumer complaints to loan providers have been rejected as they believe they haven’t acted unfairly or caused car buyers to lose out.

However, before you start expecting to receive a compensation payout, you need to find out if your finance agreement included a discretionary commission arrangement, as not all had them. The information will be in the documents you signed when buying the car.

If you can’t see anything about this in the terms and conditions, then instead of asking the dealer (broker) that sold you the car and finance, go straight to the loan provider, but don’t expect a quick reply as while the FCA is investigating whether providers have breached any legal and regulatory requirements on car finance, it has paused the eight week deadline for providers to reply to complaints.

When you do get a reply, if you’re not happy with it, the next step is to take your complaint to the Financial Ombudsman Service (FOS).

The FCA isn’t expected to reach a conclusion to its investigation until at least September 2024. If it decides consumers have lost out due to widespread misconduct, it will outline how people owed compensation receive an appropriate settlement in “an orderly, consistent and efficient way”.

Out of the many complaints the FOS has received regarding discretionary commission arrangements for car finance, two have recently been found in favour of the consumer.

Not surprisingly, the outcome of these cases and the possibility of receiving a compensation payout has caught the attention of the media and car buyers.

If you think you have been mis-sold your car finance contact Claimline Legal today on 0800 779 7457 for a free case review. Or go to

Claimline Legal represents all its clients on a no-win no-fee basis with no upfront fees. Our final success fees are fixed and capped so there are no surprises. We will never charge you more than the fees shown on our terms and conditions.





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