Mis-Sold PCPs: £13 Billion in Compensation May Be Owed

The mis-selling of Personal Contract Purchase (PCP) car finance agreements is a major issue in the UK, with recent investigations highlighting the scope of the problem. Lawyers and consumer advocates are calling it a "national scandal," and the numbers paint a grim picture. An estimated £13 billion in compensation may be owed to affected drivers a figure that could potentially double as more claims come to light.

At the core of this issue are discretionary commission agreements (DCAs), which allow car dealers and brokers to adjust the interest rate on finance deals, increasing their commissions. This practice inflated costs for consumers, often without their knowledge. The Financial Conduct Authority (FCA) banned DCAs in 2021, but many agreements struck before that date are now under scrutiny.

The problem is compounded by the fact that these commission arrangements were often not disclosed to buyers, 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 drivers feeling deceived and overcharged.

The FCA estimates that around 40% of car finance deals agreed before 28th January 2021, could have been impacted by mis-sold PCP agreements. Eligible claims typically involve:

• Finance Deals on Vehicles: Includes cars, vans, motorbikes, and motorhomes purchased before 28th January 2021.
• Ownership-Based 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.

If the finance arrangement involved leasing a car without the option to own (e.g., Personal Contract Hire) it is not eligible for compensation.

Where Are Claims Concentrated?

Scotland has emerged as a hotspot, with the highest number of claimants nearly 200,000 already coming forward. The region between Edinburgh and Glasgow has seen the greatest activity, reflecting widespread consumer dissatisfaction.

Other areas seeing significant claims include:

• North West England: Over 168,000 claims.
• West Midlands: High levels of reported cases.
• South East England: Around 155,000 claimants.
• Northern Ireland and Wales: Combined, these regions have seen over 77,000 claims.

The data underscores the national reach of the scandal, with urban and rural communities alike affected.

Recent Legal Rulings

The UK Court of Appeal recently ruled that dealerships failed to properly inform buyers about commission payments tied to finance deals. This decision is expected to pave the way for further compensation claims, with over one million drivers potentially entitled to payouts.

A Turning Point in Consumer Rights

The FCA is currently investigating allegations of widespread misconduct and has extended the timeline for its inquiry. Drivers now have until mid-2026 to lodge complaints and seek compensation. 

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.