What Is Car Finance Mis-Selling?
Car finance mis-selling refers to the practice where car dealers — acting as credit brokers — received commission from lenders that was directly linked to the interest rate they charged you. The higher the rate, the more the dealer earned. This arrangement is known as a discretionary commission arrangement (DCA).
The problem is that customers were rarely told this was happening. Dealers had a financial incentive to charge you a higher rate than your credit profile warranted, and most didn't disclose their commission arrangements at the point of sale.
The Financial Conduct Authority (FCA) banned this practice in January 2021 and subsequently launched an industry-wide investigation. It estimates that lenders may owe around £8.2 billion in total compensation.
Step 1: Identify Your Lender
The first step is to confirm who provided your car finance. This is the lender — not the car dealer. Common lenders involved in the FCA investigation include:
- Black Horse Finance (Lloyds Banking Group)
- Santander UK Consumer Finance
- Barclays Partner Finance
- MotoNovo Finance
- Close Brothers Motor Finance
- Moneybarn
- Hitachi Capital
- Volkswagen Financial Services
- Ford Credit
If you're not sure who your lender was, you can find this information on your original finance agreement, your credit file, or by contacting the dealership where you bought the car.
Step 2: Check the Date of Your Agreement
The FCA's investigation primarily covers agreements signed between January 2007 and January 2021. This is when DCA arrangements were actively in use. Agreements signed after January 2021 are unlikely to be affected because the FCA banned DCAs at that point.
In some cases, earlier agreements may also be relevant — particularly if the loan is still active or was recently settled.
Step 3: Identify the Finance Type
The investigation covers the following types of car finance:
- Personal Contract Purchase (PCP): The most common modern car finance product. You make monthly payments and then choose whether to make a final "balloon" payment to own the car, return it, or part-exchange it.
- Hire Purchase (HP): You pay fixed monthly installments and own the car outright at the end of the agreement.
- Conditional Sale: Similar to HP — you take ownership once all payments are made.
Personal loans arranged independently of the dealership are generally not in scope, but loans arranged at the dealership through a broker are typically covered.
Step 4: Review Your Finance Agreement Document
If you have your original finance agreement, look for the following:
- APR (Annual Percentage Rate): Compare this to typical rates at the time. If your APR seems high relative to your credit score at the time, this can be evidence of inflation.
- Commission disclosure: Look for any mention of "commission," "profit share," or "broker fee." Under the FCA rules in force before 2021, disclosure was often limited or absent.
- Total amount payable: The total cost of the finance over the full term tells you how much you paid above the car's cash price.
- Lender name and agreement number: You will need this if you submit a formal complaint.
Step 5: Request Your Agreement (If You Don't Have It)
Under the Consumer Credit Act 1974, you have a legal right to request a copy of your credit agreement from your lender at any time, even if the account is closed. You can do this by:
- Writing to the lender's customer service address and quoting your name, address, and approximate agreement date
- Making a Subject Access Request (SAR) under UK GDPR — lenders must respond within 30 days and provide all data they hold on you
- Checking your statutory credit file at Experian, Equifax, or TransUnion — all three offer free access and will show historical agreements
Step 6: Consider the Dealer's Role
The key question is whether the dealer acted as a credit broker and had the ability to vary your interest rate. If the dealer arranged the finance themselves (rather than you going directly to a lender independently), there is a strong probability that a DCA was in place.
Signs the dealer acted as a broker include:
- You discussed finance at the dealership before or during the car purchase
- The dealer presented you with a finance quote and handled the paperwork
- You did not independently approach the lender — the lender's name was introduced by the dealer
What to Do Next
Once you have confirmed your lender, agreement date, and finance type, you have two main options:
- Submit your own complaint: Write directly to your lender stating that you were not informed of the dealer's commission arrangement and that this may have resulted in you paying a higher interest rate than necessary. Lenders are currently required to acknowledge complaints but may pause investigation pending the FCA's formal scheme.
- Use a claims management company: An FCA-authorised claims specialist will handle the entire process for you on a no-win, no-fee basis. This is often easier, particularly if you don't have the original documents.
How Long Does It Take?
Currently, the FCA has paused formal investigation of individual complaints until the industry-wide compensation scheme is finalised — expected in 2026. Once the scheme is announced, lenders will be required to process claims within a defined timeframe. Submitting your details now means you are positioned to act as soon as the scheme opens.