Car Finance Reclaim Guide (PCP, HP Commission 2026)

What Is the Car Finance Commission Scandal?

The car finance commission scandal relates to discretionary commission arrangements (DCAs), a practice banned by the FCA from 28 January 2021. Under a DCA, the lender gave the car dealer or broker the discretion to set the interest rate on a customer's finance agreement within a range. The higher the rate the dealer chose, the more commission they earned. This created an inherent conflict of interest — the dealer was incentivised to charge you a higher APR, sometimes significantly higher than you qualified for, without disclosing the arrangement. The FCA estimates this affected millions of HP, PCP, and other car finance agreements written before the ban. In 2025, the Supreme Court in Johnson v FirstRand Bank Ltd (also known as Hopcraft v Close Brothers) confirmed that undisclosed commission arrangements breached the lender's duty to the customer. Customers who were charged higher rates due to a DCA are entitled to redress — typically the difference between the rate they paid and the rate they should have received, plus interest. The FCA has set up a redress scheme requiring lenders to proactively review past agreements and compensate affected customers.

How Commission Arrangements Worked

When you took out HP or PCP car finance through a dealership, the dealer acted as a credit broker. The lender (e.g. Black Horse, Santander, Lloyds, BMW Financial Services) offered a base interest rate — often called the "buy rate." Under a DCA, the dealer could add an extra margin on top of that rate — the "customer rate." The difference between the buy rate and the customer rate was the dealer's commission. For example, if the lender's buy rate was 5% APR and the dealer set your customer rate at 9% APR, the extra 4% was dealer commission. Over a 4-year PCP agreement on a £20,000 car, that 4% difference could cost you £1,500–£2,500 in extra interest. The dealer had no obligation to disclose this markup, and many customers were not told that a lower rate was available. DCAs were particularly common in used car finance, where interest rates vary more widely than on new car manufacturer-subsidised deals. Some customers with good credit scores were placed on higher-rate agreements simply because the dealer wanted a bigger commission payout. The FCA found that DCAs led to customers paying £300–£1,000 more per agreement on average compared to a non-DCA agreement.

Are You Entitled to Reclaim?

You may be entitled to reclaim if you took out HP, PCP, or conditional sale car finance through a dealership or broker before 28 January 2021. The finance must have been arranged by an intermediary (dealer or broker) rather than directly with the lender. You are most likely to have a valid claim if: the dealer had discretion over the interest rate (you did not negotiate or were not offered a lower rate), your APR was noticeably higher than your credit score warranted, you were not told about the commission arrangement, or you were not offered the option to arrange your own finance (e.g. through a bank loan). Even if your agreement has ended, you can still claim. The FCA redress scheme covers agreements written up to 28 January 2021, regardless of whether the agreement is still active. If you settled early or voluntarily terminated the agreement, you may still be due compensation. Claims can be made on behalf of a deceased person's estate. Business car finance (where the vehicle was used primarily for business) is not covered by the FCA scheme. Check your finance agreement paperwork — look for terms like "commission disclosure," "broker commission," or "APR range." If you no longer have the paperwork, contact your lender for a copy or check your credit report for the agreement details.

How to Complain to Your Lender

The first step is to complain directly to the lender that provided your car finance. You can use the FCA's template letter or write your own. Your complaint should include: your full name, address, and agreement reference number, the date you took out the finance and the vehicle details, the APR you paid and the total amount of credit, a request for the lender to disclose whether a discretionary commission arrangement was in place, and a request for redress (the difference between the rate you paid and the rate you should have received). Send the complaint by email and recorded delivery so you have proof. The lender has 8 weeks to respond. Under the FCA scheme, lenders are required to review your case proactively if you fall within the scope of the investigation. However, it is still advisable to make a formal complaint. If the lender upholds your complaint, they will calculate the redress — the overpaid interest plus 8% simple interest per year. Some lenders may also refund a portion of the charges if the overpayment caused you to fall into arrears or incur other costs. If the lender rejects your complaint or you do not agree with their calculation, you can escalate to the Financial Ombudsman Service.

What If the Lender Rejects Your Complaint?

If the lender rejects your complaint or fails to respond within 8 weeks, you have the right to refer the matter to the Financial Ombudsman Service (FOS) — free of charge. You must do this within 6 months of the lender's final response. The FOS will independently review your case and decide whether the lender should pay compensation. If the FOS finds in your favour, they can order the lender to pay: the difference between the rate you paid and the rate you should have received, plus 8% simple interest per year on the overpaid amount, and up to £1,000 for any distress or inconvenience caused. The FOS decision is binding on the lender but not on you — if you disagree with the decision, you can reject it and pursue the matter through the courts. However, the FOS's authority means most lenders comply with their decisions. For complaints outside the FCA scheme (e.g. business finance or agreements after January 2021), you may need to consider legal action. Claims management companies (CMCs) are actively marketing car finance reclaim services but typically charge 20–35% of the compensation. You do not need a CMC — the process is designed for individuals to complain directly. The FCA provides free guidance and template letters on its website at fca.org.uk/consumer.

Going to the Financial Ombudsman

The Financial Ombudsman Service (FOS) is an independent body that resolves disputes between consumers and financial services companies. It is completely free to use. After you receive the lender's final response (or 8 weeks pass with no response), you have 6 months to refer your case to the FOS. You can start your complaint online at financial-ombudsman.org.uk or call their consumer helpline. The FOS will ask for: your details, the lender's details, a copy of the lender's final response, and any supporting documents (your finance agreement, correspondence with the lender, etc.). The FOS will first try to mediate between you and the lender. If that fails, an ombudsman will review your case in detail and issue a decision. The ombudsman can award compensation of up to £430,000 (the 2025/26 limit). For car finance commission cases, typical awards range from a few hundred to several thousand pounds depending on the overpayment. The process usually takes 3–9 months. During the FOS review, the lender must pay the compensation within 28 days if the decision is in your favour. If you reject the FOS decision, you cannot appeal — but you can still pursue legal action through the courts. You can also ask your MP to raise the issue with the FCA if the process is taking longer than expected.

FAQs

Is there a deadline for car finance commission claims?

The FCA has paused the usual 6-year limitation period for car finance commission complaints until September 2026. This means you have until at least 2027 to submit a claim, but it is advisable to complain as soon as possible while the FCA's redress scheme is active.

Can I claim if my PCP or HP agreement is still running?

Yes. You can complain even if your finance agreement is still active. The FCA scheme covers both past and current agreements written before 28 January 2021. The lender may adjust your ongoing payments as part of the redress.

Do I need a claims management company to reclaim?

No. The FCA recommends complaining directly to your lender — it is free and straightforward. Claims management companies charge 20–35% of your compensation. Use the FCA's free template letters and guidance at fca.org.uk.

What if I cannot find my finance paperwork?

Contact the lender and request a copy of your agreement. You can also check your credit report (via Experian, Equifax, or TransUnion) which lists your credit agreements, the original lender, and the agreement start date.

Does the FCA scheme cover car loans from a bank?

No — the FCA scheme covers HP, PCP, and conditional sale agreements where a dealer or broker was involved. Unsecured personal car loans taken directly from a bank are not within scope because no intermediary set the interest rate.