What Are Car Finance Claims?
Car finance claims are becoming increasingly relevant as the Financial Conduct Authority (FCA) investigates car finance mis-selling affecting 12.1 million eligible agreements (FCA, March 2026) worth £7.5 billion (FCA estimate). This investigation is crucial for consumers who may have been overcharged due to
discretionary commission arrangements, commonly known as DCAs, which were used by lenders and dealers during the specified period from 6 April 2007 to 1 November 2024.
What Is a Car Finance Claim?
A car finance claim refers to a complaint made by consumers who took out
Personal Contract Purchase (PCP) or
Hire Purchase (HP) agreements for vehicles between 6 April 2007 and 1 November 2024. These claims are based on the discovery that many of these agreements were overcharged due to DCAs, which allowed dealers to set interest rates above a minimum threshold, thereby earning more commission by charging customers higher rates.
How Were Car Finance Agreements Mis-sold?
Discretionary commission arrangements (DCAs) played a significant role in mis-selling car finance agreements. Under this arrangement, dealers and brokers could set the interest rate on loans above a certain benchmark without approval from lenders. This practice led to consumers being charged more than necessary for their financing, resulting in higher overall costs.
The FCA banned DCAs in January 2021 following an investigation into the widespread misuse of these arrangements. The ban came after it was determined that many dealers were exploiting this system to increase profits at the expense of customers' financial wellbeing.
Am I Eligible for a Car Finance Claim?
To determine your eligibility for making a car finance claim, you should check if:
- You took out a PCP or HP agreement.
- The agreement was arranged through a dealer or broker.
- Your agreement falls within the period from 6 April 2007 to 1 November 2024.
If all these conditions apply to your situation, it is likely that you are covered by the FCA redress scheme. However, eligibility can vary based on specific circumstances and the details of your car finance agreement.
What does the FCA scheme cover
The average amount of compensation per claim is estimated at £829 (FCA estimate), with a total estimated value of claims reaching up to £7.5 billion (FCA estimate). The calculation for this compensation typically involves determining the difference between the rate charged under DCA and what would have been considered a fair rate.
Which Lenders Are Affected?
Several major lenders are implicated in car finance mis-selling, including:
These institutions have been involved in the sale of car finance agreements that may have benefitted from DCAs, leading to potential overcharging and mis-selling.
The Supreme Court Ruling on Car Finance
In August 2025, the Supreme Court upheld consumers' rights in a significant ruling concerning car finance claims. This decision clarified that lenders who engaged in practices involving discretionary commission arrangements were liable for compensation. It reinforced the importance of fair dealing and provided legal backing to support consumer complaints.
How to Make a Car Finance Claim for Free
To make a car finance claim, follow these steps:
1.
Gather Documents: Collect all relevant documents related to your car finance agreement, including loan agreements, payment records, and correspondence with lenders.
2.
Write to Your Lender: Draft a formal
complaint letter detailing the issues you experienced due to DCAs. Be sure to include evidence and explain how you were overcharged.
3.
Wait 8 Weeks: Allow the lender time to respond to your complaint. If they do not resolve it within this period, proceed to the next step.
4.
Escalate to Financial Ombudsman: Submit your unresolved complaint to the Financial Ombudsman Service (
FOS) for a fair and impartial review.
It is important to remember that you can
complain directly to your lender for free - you do not need a
claims management company. The FCA redress scheme aims to address these issues efficiently, ensuring consumers receive compensation without additional fees or complexities.
Car Finance Claims Update
The FCA has been actively investigating car finance mis-selling since the ban on DCAs in January 2021. Ongoing developments include the creation of a redress scheme designed to compensate affected customers systematically and equitably. The expected timeline for this scheme is being closely monitored by regulatory bodies, with updates provided periodically.
Frequently Asked Questions About Car Finance Claims
How Long Does It Take to Get Compensation?
The process can vary depending on the complexity of your case and the lender's response time. On average, it may take several months from initiating a claim until receiving compensation.
Is Making a Claim Worth It?
Given the potential for significant compensation (£829 average per eligible agreement) and the widespread nature of mis-selling issues (12.1 million eligible agreements (FCA, March 2026)), making a car finance claim is often worthwhile. However, individual circumstances can vary, so reviewing your agreement details thoroughly is crucial.
No, you do not need a solicitor or claims management company to make a car finance claim. You can handle the process independently and directly with your lender. Professional legal representation might be beneficial in complex cases but is generally unnecessary for straightforward complaints.
What If My Lender No Longer Exists?
Even if your original lender has ceased operations, you can still pursue compensation through their successor or via the Financial Ombudsman Service (FOS). The FCA and FOS have mechanisms to ensure that consumers are protected even when lenders become insolvent.
Sources and References
- Financial Conduct Authority (2024)
- Office for National Statistics Census 2021
- UK Supreme Court Ruling (August 2025)
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.