.jpg)
The mis-selling of motor finance is a major issue in the UK, with recent investigations and court rulings highlighting the scope and extent of the problem. Lawyers, consumer advocates and consumer groups are calling it a "national scandal," and the numbers paint a grim picture. Industry analysts have recently estimated that up to £44 billion in compensation may be owed to impacted consumers.
At the core of this issue are Discretionary Commission Agreements (DCAs), which allow car dealers and brokers to adjust and set the interest rates charged on finance deals enabling them to earn higher commissions paid to them by finance companies. This discretionary practice has inflated costs for motoring consumers, more often without their knowledge. The Financial Conduct Authority (FCA)banned DCAs, with effect from 28 January 2021, but millions of agreements struck before that date are now under scrutiny.
The problem is compounded by the fact that these commission arrangements were secret or at least not fully disclosed to car buyers during the vehicle sale process, denying them the opportunity to make fully informed financial decisions. With the cost-of-living crisis putting additional strain on households, this lack of transparency has left millions of motoring consumers feeling deceived and overcharged.
The FCA estimates that prior to 28 January 2021, 99% of motor finance deals had a commission model, with around 40% of these being DCAs. There is a high chance that anyone entering into a car finance deal with a DCA before 28th January 2021 was a victim of mis-selling. With many people having purchased more than one vehicle on finance, they could be entitled to multiple compensation pay outs on each finance agreement taken out.
Eligible claims typically involve:
- Finance Deals on Vehicles: Includes cars, vans, motorbikes, and motorhomes purchased from April 2007 and before 28th January 2021.
- Vehicle Ownership-Based Finance Agreements: Deals like Personal Contract Purchase (PCP) or Hire Purchase (HP), which transfer ownership of the vehicle to the buyer at the end of the agreement.
Recent Legal Rulings & FCA Activity
In October 2024, the Court of Appeal ruled unanimously in the case of Johnson, Wrench v FirstRand Bank Limited (trading as MotoNovo Finance) and Hopcraft v Close Brothers Limited, (‘the Johnson judgment’) that any type of commissions paid by lenders to dealers with the knowledge and informed consent of customers were unlawful.
This resulted in the FCA extending the scope of its ongoing investigations (beyond DCAs), to include Non-DCA commissions. The FCA also advised that they would be looking into potential complaints relating to secret commissions in motor vehicle leasing agreements involving finance.
In April 2025,the Supreme Court heard an Appeal by FirstRand and Close Brothers of the Court of Appeal’s Johnson judgment, with its judgment expected in July 2025.
The FCA has further announced that within 6 weeks of the Supreme Court judgment, it will issue a further statement on its intentions to consult in respect of a nationwide redress scheme for consumers impacted by this scandal.
The ‘FCA Pause’
As well as awaiting the Supreme Court’s judgment, the FCA is currently conducting its own investigations into widespread misconduct in relation to secret commission payments in motor finance and as such it has extended / paused the deadline for finance firms to respond to consumer complaints in these cases to 8 weeks after 4thDecember 2025. This is known as the FCA Pause.
The Future…
This scandal is a reminder of the importance of transparency in financial agreements. As the FCA works to address past misconduct and implement stricter regulations, the hope is that future car buyers will have the clarity and protection they deserve. For now, affected drivers have a chance to reclaim what they’re owed and hold the industry accountable.