Millions of UK drivers risk having unknowingly overpaid for their vehicles due to a major mis-selling scandal in the car finance industry. Described as one of the most significant consumer justice cases since the Payment Protection Insurance (PPI) scandal of the late 90s, the spotlight has been placed on hidden commissions which were embedded into car finance agreements.
At the heart of the issue lies the widespread use of Discretionary Commission Arrangements (DCAs), which allowed car dealers and brokers to increase interest rates to bolster their own commission, while failing to disclose this to the customer. These arrangements, which were banned by the Financial Conduct Authority (FCA) in 2021, are now being heavily scrutinised across all legal levels.
Following the Court of Appeal declaring these practices unlawful, the matter now sits with the Supreme Court. This risks compensation payouts of up to £30 billion, meaning millions of agreements taken out before the FCA’s ban came into force are liable to be charged.
Jon Paton of Claim My Loss, comments: “If the Supreme Court upholds the Court of Appeal’s ruling, this will send a powerful message that financial institutions must operate both transparently and ethically. With up to 31 million car finance agreements potentially affected, we’re facing a reckoning on the same scale as PPI, but with a crucial difference. This time, the redress could be automatic, while PPI claims required individuals to demonstrate that the sale hadn’t been fair.”
Is This a Tipping Point for Financial Accountability?
The FCA is currently considering the introduction of an industry-wide redress scheme, which, if implemented, could mean automatic compensation. This marks a stark departure from the previous PPI redress model, which required individual action from those impacted.
While this move could provide quicker access to justice for millions, it also raises concerns for the consumers who have already taken proactive steps to raise complaints, whether through solicitors or Claims Management Companies (CMCs).
“There’s a risk that early claimants could end up worse off than those who never made a claim,” Paton adds. “People who acted in good faith to expose systemic wrongdoing may be penalised by being charged fees, while more passive consumers benefit from automatic payouts, reflecting a serious imbalance that regulators must consider.”
Pressure on Claims Management Companies
Solicitors firms, such as Claim My Loss, play a vital role in helping consumers access justice, especially in complex financial disputes where information can feel overwhelming. However, there is a mounting cost of running these claims due to annual fees and levies, which even smaller firms are subjected to. In addition, recent FCA-imposed levies and fee structures, such as the introduction of a £250 Ombudsman fee to refer claims, risk making the environment unsustainable for many smaller firms.
“Claim My Loss maintained a 54% uphold rate last year, compared to the FOS average of 37%,” explains Paton. “That shows we’re doing the right thing for our clients. Unfortunately, it’s becoming increasingly difficult to keep that going under the weight of regulatory costs. Historically, we have always used the FOS as a means keeping costs down for our clients, however with the £250 fee and the limit on the fees we are able to charge under SRA regulation, it simply won’t be commercially viable to take on clients with smaller claims, especially when providers are unwilling to share the required evidence with us. ”
What Consumers Need to Know
If you purchased a car finance agreement before 28 January 2021, particularly one involving a Personal Contract Purchase (PCP) or Hire Purchase (HP) deal, there’s a strong chance you’re liable for compensation. This is especially true as many consumers were unaware that the dealership or broker could adjust their interest rate to earn more commission, without ever disclosing this incentive.
While the FCA’s redress plans remain under review, Claim My Loss urges consumers not to wait.
“If you suspect you’ve overpaid for your car finance, speak to us,” Paton urges. “We’re here to provide free, no-obligation advice. Whether the process becomes automatic or not, getting clarity on your case now puts you in the best position to recover what’s rightfully yours.”
Looking Ahead
There are still uncertainties to the process, but if the FCA’s eventual compensation framework undervalues claims or excludes certain cases, some consumers may still need to pursue legal action to achieve fair redress. In such scenarios, litigation could bring added delays and costs, putting even more pressure on individuals seeking closure to financial strife.