>Car Finance Claims Guide

> Quick Overview

Did you take out a car finance agreement between 2014-2020? You could be owed £1000s in recovered interest payments due to hidden commission paid to the car dealership or finance broker.

All major lenders are being investigated for this mis-selling in a scandal which could be larger than the PPI mis-selling. Find out if you are eligible to claim today.

Start Your Claim*

*You do not need to use a claims management company to make a car finance claim. You have the right to complain directly to the lender and use the Financial Ombudsman Service to seek redress for free.

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> What Is The Car Finance Mis-Selling Scandal?

While transparency should be at the forefront of every financial agreement, unfortunately many UK residents have found themselves trapped in car finance deals that weren't as clear-cut as they first seemed.

Mis-sold Personal Contract Purchase (PCP) and Hire Purchase (HP) car finance claims have surged to the spotlight after a FCA report revealed a widespread issue of undisclosed commissions and misleading advice that has left countless consumers overpaying, often without their knowledge.

Now, individuals are being given the opportunity to claim back thousands in undue charges and interest fees. In this guide, we aim to equip you with the knowledge and support needed to navigate this complex landscape and reclaim your owed compensation.

> What Are Mis-Sold Car Finance Claims?

Mis-sold car finance claims arise from situations where individuals were not fully informed or were misled about the commissions earned by the broker, as well as the terms, conditions, and costs associated with their car finance agreements. 

These claims centre around the assertion that consumers were entered into Personal Contract Purchase (PCP) or Hire Purchase (HP) agreements without a transparent understanding of what they were signing up for, often leading to financial disadvantages that they were not made aware of at the time of the agreement.

> What Are The Key Aspects of Mis-Sold Car Finance Claims?

+ Undisclosed Commissions

Customers were not informed that the dealership or broker would receive a commission from the lender for arranging the finance, which often resulted in higher interest rates for the consumer.

+ Inflated Interest Rates

The interest rates on finance agreements were increased without clear explanation or justification, usually to increase the commission paid to the broker or dealership.

+ Unsuitable Financial Products

Finance products were recommended that did not suit the customer’s needs or financial situation, often leading to overpayments or financial strain.

+ Lack of Transparency

Essential information about the total cost of the finance, including fees, charges, and the full implications of the agreement, was not adequately disclosed.

+ Failure to Conduct Proper Affordability Checks

Lenders or brokers did not adequately assess the customer’s ability to afford the finance agreement, leading to situations where customers were overburdened by payments.

> What Is Hidden Commission?

Hidden commission in the context of car finance refers to a situation where the car dealership or finance broker receives a payment or fee from the lender for arranging a finance agreement, without the knowledge or informed consent of the customer.

This commission is often linked to the interest rate of the finance agreement, with higher commissions paid for agreements with higher interest rates. The key issue with hidden commissions lies in the lack of transparency and potential conflict of interest, as customers may end up paying inflated interest rates not because of their credit score, but because it benefits the broker or dealership financially.

> Key Characteristics Of Hidden Commission

+ Potential Conflict of Interest

Dealerships or brokers might prioritise their own financial gain over the best interest of the customer, leading to the customer being offered products that are not the most suitable or cost-effective.

+ Lack of Disclosure

The customer is not informed about the commission that the dealership or broker receives from the lender for securing the finance deal.

+ Influence on Interest Rates

Under the now banned Increasing Difference in Charges (DiC) model, the amount of commission can influence the interest rate offered to the customer, with higher rates providing higher commissions.

+ Regulatory Concerns

Hidden commissions have raised significant regulatory concerns for their lack of transparency and fairness, leading to interventions by regulatory bodies like the Financial Conduct Authority (FCA) in the UK. The FCA banned the DiC model in January 2021.

> How Much Compensation Can I Receive For My Mis-Sold PCP Claim?

The amount of compensation you can receive for a mis-sold car finance claim varies based on several factors unique to each case. There isn't a one-size-fits-all answer, as the compensation will depend on the extent to which the mis-selling has affected you financially and the specifics of your finance agreement. However, several key factors influence the potential compensation amount.

+ Overcharged Interest

If you were charged higher interest rates due to undisclosed commissions, the compensation could include the difference between what you paid and what you should have paid, had the commission been disclosed.

+ Length of Agreement

Generally, longer agreements might result in higher overpayments due to prolonged periods of charged interest, especially if those rates were inflated due to mis-selling practices.

+ Inappropriate Financial Products

If the finance product was unsuitable for your needs and financial situation, compensation might reflect the financial detriment suffered as a result.

+ Excessive Fees and Charges

Any unfair or hidden fees that were added to your finance agreement without proper disclosure could be reimbursed as part of the compensation.

+ Affordability Issues

If the finance agreement was unaffordable and this was not properly assessed or disclosed to you, compensation could include costs related to financial hardship or overpayment.

Calculations will often start with assessing how much extra interest you paid over the life of the loan due to the higher rates from undisclosed commissions. The Claim.co.uk legal panel will keep you informed as to how much compensation you should look to receive if you are successful in your claim.

> Who Can Claim Mis-Sold PCP Compensation?

Our free-to-use eligibility checker can find car finance agreements dating between 2014-2020. In their report, the FCA found commission was paid on 95% of agreements they checked, with 40% using the vital DiC model.

This means if you took out a car finance agreement between 2014-2020 you could be eligible to thousands in recovered interest payments. You can check potential eligibility in a matter of minutes here, for free:

> What Were The FCA Findings In 2019?

The groundbreaking 2019 FCA report into car finance in the UK uncovered serious malpractice within the industry.

Their in-depth investigation was part of a broader scrutiny of the car finance sector, driven by concerns over the transparency and fairness of these financial products. Here are some of the key findings from the FCA's investigation into PCP agreements:

+ Widespread Use of Discretionary Commission Models

The FCA found that many lenders allowed car dealerships and brokers to have discretion over the interest rates charged to consumers. This practice led to higher commissions for the brokers or dealerships but resulted in consumers paying significantly more in interest costs.

+ Lack of Transparency and Disclosure

The investigation highlighted a lack of transparency regarding the commission arrangements between lenders and dealerships/brokers. Consumers were often unaware that these commissions could influence the interest rate of their PCP agreement, leading to a conflict of interest that was not disclosed.

+ Potential Consumer Harm

The FCA identified that the discretionary commission model and lack of transparency could lead to significant consumer harm, with many individuals paying higher costs than necessary. This practice raised concerns about the affordability and suitability of car finance products for some consumers.

+ Poor Affordability Assessments

The FCA's review also pointed to weaknesses in the way some lenders assessed consumer affordability. There were instances where lenders did not adequately verify consumers' income and expenses, raising the risk of consumers being granted credit that they could not afford.

+ Inadequate Explanations of Contract Terms

Some consumers were not provided with clear and comprehensive explanations of their PCP agreements, including the implications of balloon payments at the end of the contract and the conditions under which they could return the car without incurring additional costs.

You can read the full 2019 report here - https://www.fca.org.uk/publication/consultation/cp19-28.pdf

> What Was The FCA Response?

As a result of their findings, the FCA introduced several measures to address the issues identified in their investigation:

+ Ban on Discretionary Commission Models

The FCA announced a ban on certain types of discretionary commission models, specifically those that allowed brokers or dealers to adjust the interest rate and thereby affect their commission. This measure aimed to remove the financial incentive to sell more expensive credit to consumers. This ban was brought into affect in January 2021.

+ Improved Transparency

The FCA has mandated that lenders and brokers provide clearer information to consumers about the commission they receive for arranging car finance, helping consumers understand potential conflicts of interest.

+ Strengthened Affordability Assessments

Lenders are now required to strengthen their affordability assessments to ensure that consumers are granted credit they can afford, taking into account their financial situation more comprehensively.

+ Enhanced Consumer Information

The FCA has emphasised the need for better consumer information about car finance options, including the costs and features of PCP agreements, to help consumers make informed decisions.

> Is The PCP Claim No Win, No Fee?

Yes, all of our legal panel’s mis-sold car finance claims are No Win, No Fee.

The legal panel we refer you to will take your case on a No Win, No Fee basis. Their No Win No Fee percentage can be up to 50% inc. VAT.  There may be a termination fee if you cancel your claim with a panel member after the cooling off period.

In addition to this, the Claim.co.uk assessment and referral service is completely free of charge to you.

Our referral service is completely funded by our legal partners, who pay an admin fee to us for our service. There is no cost to you at all for use of our services.

> How Can Claim.co.uk Help With My Car Finance Claim?

Claim.co.uk offers a comprehensive service designed to support individuals in pursuing claims for mis-sold car finance claims.

We have partnered with the law firms across the country to ensure that you claim is dealt with by the most appropriate legal professional.

We also give you free access to our guides which explain in detail the potential claim and whether or not you may be eligible.

Our online eligibility tool allows you to quickly determine if you might have a valid claim for mis-sold car finance, saving you time and providing initial guidance at no cost.

Our streamlined process, expert guidance, and commitment to your success provide a solid foundation for pursuing your claim with confidence. Find out today if you are eligible to claim compensation for a car finance claim.

> Start Your Claim

Enter your basic info and we'll search for all your car finance agreements between 2014-2020 so you can easily start your claims.


> Important Claim Information

  • Secret Commission may have been paid on your car finance agreement, and thousands could be owed after the FCA found commission paid on 95% of agreements
  • Each agreement could be worth £1000s in recovered interest payments
  • You don't need to still be in contract.
  • Cars, vans and motorbikes are all included.
  • All major, prime lenders are being investigated.
Start Your Claim*

*You do not need to use a claims management company to make a car finance claim. You have the right to complain directly to the lender and use the Financial Ombudsman Service to seek redress for free.

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