The FCA Investigation Into PCP Mis-Selling: What It Means for You
In January 2021, the Financial Conduct Authority quietly changed the rules governing how car
finance could be sold in the UK — and in doing so, confirmed what many consumer advocates had
suspected for years: that millions of drivers had been paying more than they should have.
The FCA banned discretionary commission arrangements (DCAs) — a practice
that had allowed car dealerships to set or adjust the interest rate on a customer's finance
agreement. The higher the rate, the more commission the dealer earned. The customer paid more.
And almost nobody was told.
What followed was one of the most significant consumer finance investigations in recent UK history.
What the FCA Actually Found
The FCA's review didn't just uncover isolated cases of mis-selling. It found that DCAs were
structurally embedded across the motor finance industry, used by a wide range
of lenders and brokers over a period spanning more than a decade.
Key findings from the investigation include:
- Dealers routinely set interest rates above the lender's minimum, with no obligation to act in the customer's interest
- Customers were almost never told that commission was being paid, let alone that it influenced their rate
- The practice disproportionately affected customers who were least likely to negotiate or shop around
- The FCA estimated that the total cost to UK consumers ran into billions of pounds
The ban on DCAs in January 2021 stopped the practice going forward — but it did nothing for
the millions of drivers who had already been affected. That is what the ongoing investigation
and potential redress scheme is designed to address.
Why PCP Agreements Were Particularly Affected
While DCAs applied across multiple types of car finance, PCP agreements were
especially exposed — for a structural reason.
PCP deals are built around low monthly payments. The deposit, monthly instalments, and final
balloon payment are all calculated to make the deal feel affordable. But the total cost of
credit — which includes the interest paid over the term — is far less visible to the average
customer than the monthly figure.
This made it easier for inflated interest rates to go unnoticed. A dealer increasing a rate
from 7% to 10% APR on a three-year PCP deal would add relatively little to each monthly
payment — but would generate a significantly higher commission, and cost the customer hundreds
of pounds more overall.
How Much Could Affected Consumers Claim?
The FCA has indicated that the average claim may be worth around £700, though
this figure varies considerably based on the specifics of each agreement. Higher vehicle values,
longer contract terms, and larger gaps between the applied rate and a fair market rate all
increase the potential claim value.
Factors that influence the calculation include:
- Total amount financed — the larger the loan, the greater the impact of an inflated rate
- The interest rate differential — how far above a fair rate your actual rate was set
- Contract length — more months means more compounded overpayment
- The lender involved — some lenders offered dealers greater flexibility to inflate rates than others
Who Is Eligible to Make a PCP Claim?
The FCA investigation covers a defined window of time, and eligibility is primarily determined
by when your agreement was taken out and how it was arranged.
You are likely eligible if:
- Your PCP agreement was taken out between April 2007 and January 2021
- It was arranged through a car dealership acting as a credit broker
- You were not informed about the commission arrangement or how it affected your interest rate
- Your agreement was with a UK-regulated lender
The status of the agreement today — whether it is active, settled, or ended years ago — does
not affect eligibility.