The Financial Conduct Authority (FCA) is currently investigating a car finance scandal where lenders allowed brokers to adjust interest rates for higher commission – and you can easily check if you were affected
Brits are being warned that they could have been mis-sold car finance if they bought a vehicle before January 2021.
The Financial Conduct Authority (FCA) is currently investigating a scandal which saw lenders allowing brokers to adjust the interest rates they offered customers for car finance. The higher the interest rate, the more commission the broker received.
These discretionary commission arrangements (DCAs) meant that customers ended up paying more than they needed to, as brokers had an incentive to increase the charges.
The FCA banned the practice in 2021 and is currently investigating these agreements, explaining on its website that since the ban there has “been a high number of complaints from customers about how much they were charged before the ban”.
The authority added: “Providers were rejecting most of these complaints, because they believe they haven’t acted unfairly and haven’t caused customers to lose out. Once we get the Supreme Court’s decision, if we find that motor finance customers have lost out, it’s likely we’ll consult on introducing a redress scheme.”
If you bought a motor vehicle on finance before 28 January 2021, you may be eligible to claim. This doesn’t just apply to cars, but also the likes of vans, camper vans and motorbikes.
If you think you might be eligible to make a complaint, you can check for free – the FCA has a handy guide here. For example, if you think that your car finance agreement wasn’t fair, or if you weren’t told the car dealer would get commission for arranging the deal.
The FCA is currently looking into the agreements, and if it finds that consumers lost out because of “widespread misconduct”, it will look at how to ensure customers get compensation. However, you can still make a complaint while the authority carries out its investigation.
As well as being able to check for free, you could choose to use a Claims Management Company (CMC), although the FCA has warned Brits to avoid this option. These firms can either help you make a claim (but will charge you a fee for the service) or pass your details on to lawyers who can help make the claim too.
If you are going to use a CMC, you’ll need to make sure that it’s one that’s approved by the FCA using their firm checker here, or one that’s regulated by a legal regulator. You can find out more on the FCA website.
For example, a red flag is always if a firm doesn’t tell you that you have the option to lodge a complaint yourself for free.
Some examples of CMCs which are authorised by the FCA include:
The FCA advises: “Claims management companies (CMCs) are aware of the time limits that apply depending on the stage of your complaint. Your CMC should keep you up to date on the progress of your complaint. Contact your CMC if you want more information.”
A key turning point in the scandal came in October last year, when the Court of Appeal ruled that the failure to disclose commissions on car loans was unlawful. The ruling has led to a surge in complaints, According to the Financial Ombudsman Service, this prompted a record 18,658 new car finance cases in the last quarter of 2024.
However in January 2025, UK Chancellor Rachel Reeves sought to intervene to protect lenders from potential multibillion-pound payouts, expressing concerns about the broader economic implications and the potential impact on consumers’ access to car loans.
It’s worth noting that the Supreme Court is currently reviewing a key appeal by car loan providers, following previous rulings that favoured customers. The FCA has temporarily paused the complaints process pending the court’s decision, which is expected later this year. The outcome of this appeal will be key in determining the liability of lenders.
