The Financial Conduct Authority (FCA) has exposed shocking levels of mis-selling in the car finance sector. Their investigation revealed that lenders and dealerships pushed customers into high-cost agreements without proper checks. Many drivers unknowingly paid thousands more than necessary due to hidden commissions and unfair interest rates.
What Did the FCA Find?
The FCA’s investigation focused on discretionary commission arrangements (DCAs), which allowed brokers to set interest rates for financial gain. This practice encouraged lenders to inflate rates, increasing costs for customers. The watchdog found that many consumers were misled about the terms of their finance deals, leaving them locked into unfair contracts.
How Many Customers Are Affected?
Millions of UK drivers who financed vehicles through Personal Contract Purchase (PCP) or Hire Purchase (HP) could be entitled to compensation. A report by the FCA estimates that affected customers may have overpaid by £1,100 to £1,500 per deal. If you financed a car before January 2021, you could have grounds for a claim.
Could You Be Owed Compensation?
If you took out a PCP or HP agreement in the past, you may have been mis-sold a deal. Lenders often failed to explain how interest rates were set or how commissions worked. Many customers believed they were getting the best rate when, in reality, brokers were prioritising profits over fairness.
How to Check If You Were Mis-Sold a Car Finance Deal
- Review your finance agreement and check if it included discretionary commissions.
- Compare your interest rate to market averages at the time of purchase.
- Look for any hidden fees or unexplained charges on your contract.
If any of these apply, you might have a case for compensation. Many claims management firms now offer free eligibility checks to help consumers recover their money.
What Can You Do Now?
The FCA is working on a redress scheme, but consumers can start their claims immediately. Using a PCP claims calculator can help estimate the amount you could be owed. If you believe you were mis-sold, act quickly to gather documents and submit your claim before any deadlines.
Final Thoughts
The car finance scandal mirrors past mis-selling issues in the UK, such as PPI claims. If you suspect you were affected, taking action now could result in a significant payout. Stay informed and check your agreement before the redress process closes. The sooner you act, the better your chances of reclaiming overpaid money.