If you’ve ever bought a car on finance in the UK, there’s a good chance you’ve heard about the ongoing mis-sold car finance scandal. It’s been making headlines for a couple of years now, and as we wrap up 2025, things are still developing. At its heart, this is about hidden commissions – secret payments from lenders to car dealers that could have led to you paying more interest than necessary.
I’ve followed this closely, and I’ll break it down in plain English, based on the facts from the Financial Conduct Authority (FCA) and court rulings. No hype, just straightforward info to help you understand what’s going on.
What Are Hidden Commissions in Car Finance?
When you finance a car through a dealership (using something like Hire Purchase (HP) or Personal Contract Purchase (PCP)), the dealer often acts as a “broker” introducing you to the lender (usually a bank or finance company).
In many cases – especially before 2021 – the lender paid the dealer a commission for arranging the deal. That’s normal in finance, but the problem arose when:
- The commission wasn’t properly disclosed to you (or not disclosed at all).
- The way the commission was structured gave the dealer an incentive to push higher interest rates.
The most controversial type was the Discretionary Commission Arrangement (DCA). Under a DCA, the dealer could adjust your interest rate upwards, earning themselves more commission the higher the rate went. You might have ended up paying, say, 10% interest when a fairer rate could have been lower – all without knowing why.
The FCA banned DCAs in January 2021 because they created a clear conflict of interest. But millions of deals from 2007 onwards may have included them or other undisclosed commissions.
Why Is This Considered Mis-Selling?
The key issue is transparency and fairness. Courts and the FCA have ruled that if you weren’t told about the commission (its existence, how it worked, or how much it was), you couldn’t make an informed decision. You might have:
- Negotiated a better rate.
- Shopped around for cheaper finance.
- Chosen a different car or deal.
A landmark Court of Appeal ruling in October 2024 said it was unlawful for dealers to receive commissions without proper disclosure and your informed consent. The Supreme Court reviewed this in 2025 and narrowed it somewhat – hidden commissions alone don’t always make a deal unfair – but unfairness can still arise from non-disclosure, especially if combined with high commissions or misleading info.
The FCA’s view: Many agreements were unfair because customers overpaid due to lack of transparency.
Are You Eligible for a Claim?
Potentially yes, if your car finance agreement (for a car, van, motorbike, etc.) was between 6 April 2007 and 1 November 2024, and involved one of these undisclosed features:
- Discretionary Commission Arrangement (DCA) – The big one, affecting around 11-14 million agreements.
- High commission – Where the commission was excessively large (e.g., at least 35% of the total cost of credit).
- Tied arrangements – Where the dealer had exclusive links to certain lenders, limiting your options.
Even if you’ve paid off the car or sold it, you could still be eligible.
The FCA estimates around 14 million agreements show signs of unfairness.
What’s the Latest as of December 2025?
The FCA has been consulting on an industry-wide redress scheme since October 2025 to handle compensation efficiently (rather than millions of individual complaints).
- Consultation closed around mid-December 2025.
- A final decision on whether the scheme goes ahead (and its exact rules) is expected in February–March 2026.
- If approved, payouts could start later in 2026.
- Average compensation modelled at around £700 per agreement (refund of excess interest plus compensatory interest), though it varies.
- Total industry cost estimated at £8-11 billion.
Firms have paused handling most commission complaints until 31 May 2026 (extended recently) to align with the potential scheme.
What Should You Do Now?
- Complain if you haven’t already – It’s free and puts you in the queue. Contact your lender directly (find details on old paperwork or credit report). The FCA says you don’t need a claims company – they take fees (up to 30-36% plus VAT) for something that might become automatic.
- Check your old agreements – Look for mentions of commission or unusually high interest.
- Be patient – No payouts yet, and things could change with the final FCA decision.
This isn’t like PPI where everyone got huge sums quickly – it’s more nuanced, and averages are lower. But if you were affected, it’s worth checking because the overpayments add up over years.
If you’ve got specific details about your finance deal, feel free to share more, and I can help point you in the right direction. Stay informed via the FCA website for the latest updates in 2026!
