HP car finance claims have gained significant attention alongside
PCP claims due to the Financial Conduct Authority's (FCA) investigation. Many consumers are unaware that HP agreements, similar to
Personal Contract Purchase (PCP), were also affected by mis-selling practices.
HP car finance allows individuals to purchase a vehicle through fixed monthly payments over an agreed period. After making all the required payments, including an initial deposit and final balloon payment, the consumer becomes the outright owner of the car. Unlike PCP, which often involves returning or buying out the car at the end of the term, HP ensures that you own the vehicle upon completion.
In a typical HP agreement, the borrower makes an upfront deposit, followed by monthly instalments spread over several years. This arrangement is popular for those who prefer to own their vehicles outright rather than leasing them indefinitely.
How Were HP Agreements Mis-sold?
HP agreements were subject to mis-selling practices due to
discretionary commission arrangements (DCAs). These DCAs allowed dealerships and lenders to set the interest rates on car finance agreements, potentially leading to higher costs for consumers. The FCA's investigation uncovered that these practices affected both HP and PCP agreements during the period from 6 April 2007 to 1 November 2024.
When a DCA was in place, lenders could manipulate the terms of the agreement to benefit themselves financially rather than focusing on providing the best deal for the customer. This led to instances where consumers were given car finance deals with higher interest rates and more expensive overall costs than they should have been offered based on their creditworthiness.
HP vs PCP: Which Claims Are Covered?
Both HP and PCP agreements are covered under the FCA's investigation into mis-selling practices. However, there are some key differences between these two types of finance:
- Ownership: With HP, you own the car outright at the end of the agreement if all payments have been made. In contrast, with PCP, you typically do not own the vehicle unless you choose to make a final balloon payment or refinance.
- Balloon Payment: While both agreements often involve a balloon payment (also known as a guaranteed minimum future value in PCP), this is usually higher and more critical for ownership in HP than it is for keeping the car in PCP.
Despite these differences, the FCA's investigation has found that DCAs affected both types of finance equally. Consumers who entered into HP agreements during the specified period may be eligible to receive compensation if their agreement was mis-sold due to a DCA.
How to Check Your Agreement Agreements outside this period are not typically affected.
- Commission Disclosure: Look for any documentation or information provided at the time of signing that indicates a discretionary commission arrangement (DCA). If there is evidence of such an arrangement, your agreement may have been mis-sold due to these practices.
- Lender Information: Verify the lender involved. Many major lenders were part of the FCA's investigation and are now offering redress for affected customers. Commonly known lenders include banks, car manufacturers' finance arms (such as Volkswagen Financial Services), and independent finance companies like Black Horse and Silk Auto Finance.
How Much Compensation for HP Mis-selling?
The average compensation amount for mis-sold HP agreements is around £829 (FCA estimate). However, this can vary based on the individual circumstances of each case. Factors such as the length of the agreement and the extent to which it was affected by DCAs will influence the level of redress offered.
while PCP claims have received more media attention, HP agreements are equally covered by the FCA redress scheme. if mis-sold. The FCA estimates that there were 12.1 million eligible agreements (FCA estimate) in total during the specified period, many of which fall under HP financing.
If you suspect your HP agreement was affected by a DCA and resulted in mis-selling, the first step is to
[complain directly](https://mlj.org.uk/guides/how-to-complain-to-your-lender) to your lender. This process can be done without the need for any third-party claims management companies.
Here’s how to proceed:
1.
Gather Documentation: Collect all relevant documents related to your car finance agreement, including the original contract, correspondence with the lender, and any evidence of commission arrangements.
2.
Write a Formal Letter: Draft a formal
complaint letter outlining the issues you experienced. Be clear about why you believe the agreement was mis-sold due to DCAs.
3.
Submit Your Complaint: Send your complaint directly to the lender's customer services department or dedicated complaints team. Make sure to keep copies of all correspondence and any responses received from the lender.
4.
Follow Up: Keep track of the timeline for responding to your complaint. Lenders are required by law to acknowledge receipt of your complaint within a few days and provide a full response within eight weeks (FCA guidance).
You do not need a
claims management company or solicitor to
complain to your lender; the process can be handled directly with your lender at no cost.
Escalating to the [Financial Ombudsman](https://mlj.org.uk/guides/financial-ombudsman-service)
If you are unsatisfied with how your lender has responded to your complaint, you have the option to escalate it to the Financial Ombudsman Service (
FOS). The FOS provides a free and impartial service for resolving disputes between consumers and financial firms. Here’s what you need to do:
1.
Initial Review: Ensure that your complaint was handled appropriately by your lender according to their procedures.
2.
Request an Ombudsman Review: If the lender's response does not resolve your issue, contact the FOS within six months of receiving the final decision from the lender (or earlier if you believe the matter is urgent).
3.
Provide Necessary Documentation: The FOS will require copies of all relevant documentation and correspondence between you and the lender.
4.
Await Ombudsman Decision: Once your case is registered, an independent ombudsman will review it and make a decision based on fairness to both parties involved.
The process with the Financial Ombudsman Service is free for consumers, providing another layer of protection and support in resolving car finance disputes without needing to hire legal representation.
Sources and References
- FCA, 2024
- Office for National Statistics (ONS) Census 2021
Key FCA Figures
The FCA confirmed on 30 March 2026: 12.1 million eligible agreements, £829 average compensation per agreement, £7.5 billion total redress at 75% consumer uptake, and £9.1 billion total cost to firms. The scheme covers agreements from 6 April 2007 to 1 November 2024. Two deadlines apply: 30 June 2026 for post-2014 agreements and 31 August 2026 for pre-2014. Final complaint deadline: 31 August 2027.
You can complain to your lender directly for free. You do not need a claims management company.
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MLJ.org.uk (mlj.org.uk) is a free, independent information service. We are not a claims management company, solicitor, law firm, or financial adviser. We do not handle complaints, process claims, charge fees, or accept any percentage of compensation. This information does not constitute legal or financial advice. You can complain to your lender directly for free. You do not need a claims management company. If your lender rejects your complaint, you can escalate to the Financial Ombudsman Service at no cost. For personalised legal or financial advice, consult a qualified professional.