The UK is currently facing a significant car finance mis-selling scandal, with thousands of drivers potentially affected. The Financial Conduct Authority (FCA) has announced plans to consult on an industry-wide redress scheme, which could lead to payouts for millions of car finance customers.
What is car finance mis-selling?
Car finance mis-selling occurred when someone wanted to buy a car using finance, the dealer or broker arranging finance without informing the customer that, they, the dealer or broker would receive a commission, and also without getting the customer’s consent to this commission payment. This should include telling the customer about the amount of commission and how it was calculated.
This could potentially incentivise dealers to place customers on higher interest rate deals as this would mean higher commission payments for the dealer or broker.
This practice, known as “discretionary commission arrangements” (DCAs), was common before January 2021 and affected approximately 40% of car finance deals.
Might you be affected?
You may have been affected if you bought a car under a car finance scheme (e.g., hire purchase or personal contract purchase) before January 28, 2021, and there was an unknown commission arrangement between your lender and broker.
Next steps
- The FCA is expected to launch its consultation on the redress scheme later in 2025.
- A Supreme Court decision on whether customers have been mis-sold car loans is anticipated in early April 2025.
- If you believe you’ve been affected, you can contact the firm that sold your car finance product.
It’s important to note that this investigation primarily focuses on car finance agreements, but complaints related to other motor vehicles (vans, caravans, motorbikes, etc.) may be explored with regulators in the future.
Keep up to date with this situation on the FCA web page –
https://www.fca.org.uk/consumers/car-finance-complaints
