Mis-sold car finance: how to check if you can reclaim

If you bought a car on finance before 2021, there is a chance the deal cost you more than it should have. A type of hidden commission was widespread for years — and you may be able to complain and reclaim, for free, without using a claims-management company.

What actually went wrong

For years, many car dealers and brokers arranged finance through what was called a discretionary commission arrangement, or DCA. Under these deals, the broker could raise the interest rate you were offered, and the higher the rate, the more commission they earned. The incentive worked against you: you could pay more interest without ever being told why.

The Financial Conduct Authority (FCA) banned discretionary commission arrangements at the start of 2021. Since then, regulators and the courts have been examining how these arrangements — and the way commission was disclosed more broadly — were handled, and whether affected customers are owed redress.

Could your agreement be affected?

It is most likely worth checking if all of the following are true:

• You took out car finance — typically PCP (Personal Contract Purchase) or hire purchase — to buy a car, van or motorbike.
• The agreement started before 28 January 2021, when the ban came into force.
• It was arranged through a dealer or broker rather than directly with a bank.

You do not need to still own the car, and the finance does not need to be ongoing. Old, settled agreements can still be checked.

How to check — and complain — yourself

You can do this without paying anyone. Claims-management firms and some solicitors will offer to handle it for a cut of any payout, but the same complaint is free to make on your own.

• Find your agreement. Dig out the original finance paperwork, or ask the lender for a copy. You are entitled to request the information they hold about you.
• Identify the lender. This is the finance company named on the agreement, not necessarily the dealer you bought from.
• Complain to the lender first. Ask whether your agreement involved a discretionary commission arrangement, and complain if you were not told about commission that affected your rate.
• Escalate if needed. If you are unhappy with the response, you can refer the complaint to the Financial Ombudsman Service, which is also free to use.

A note on timing

Because this is an active regulatory matter, lenders have at times been given extra time to respond to these complaints, and the rules around deadlines have shifted. Check the FCA’s car finance pages for the current position before you assume a complaint is too early or too late, and keep a copy of everything you send.

Ready to take action? Download our free VT letter template

Voluntary termination is a separate right from a mis-selling complaint. If you have paid at least half of the total amount payable under a regulated PCP or hire-purchase agreement, you can hand the car back and walk away under Section 99 of the Consumer Credit Act 1974. Our free template gives your finance company formal notice — fill in the bracketed details, send it by recorded post, and keep a copy for your records.