The Financial Conduct Authority (FCA) is investigating widespread misconduct in car finance agreements. This crackdown could result in billions in refunds for consumers who were overcharged through unfair commission models. If you took out car finance before 2021, you might be owed money.
Why Is the FCA Investigating Car Finance Deals?
The FCA has identified a major issue with discretionary commission arrangements (DCAs). These allowed brokers and dealerships to set interest rates, earning more commission when they increased customer payments. This practice created a clear conflict of interest, leading to unfair charges for millions of car buyers.
A similar crackdown on payday loans saw lenders refund over £1 billion. Experts predict the car finance scandal could be even bigger. The FCA’s investigation could force lenders to compensate affected customers, potentially reshaping the auto finance industry.
Who Could Be Owing Money?
If you took out a Personal Contract Purchase (PCP) or Hire Purchase (HP) deal before 2021, you might be eligible for compensation. The main focus is on agreements where brokers manipulate interest rates to increase commissions. Even if your deal is paid off, you could still make a claim.
Lenders such as Barclays Partner Finance, Santander, and Close Brothers are under scrutiny. If you had a car loan through one of these providers, you should check if you were affected. Many consumers have already started enquiring about Close Brothers compensation, seeking refunds for unfairly inflated interest payments.
How Much Could You Get Back?
The potential payouts vary, but estimates suggest affected customers could receive thousands. In previous financial scandals, regulators have ordered full refunds plus interest. If the FCA rules against lenders, those mis-sold finance deals could see a significant windfall.
For example, the average UK car loan interest rate is 9.9%. If your lender unfairly raised it, you could reclaim the extra interest paid over your contract’s term. With millions of agreements in question, the total compensation bill could exceed £10 billion.
How to Check If You Were Mis-Sold
Start by checking your original car finance agreement. Look for references to commissions or interest rates that changed without clear explanation. If your lender charged you more due to commission incentives, you may have a valid claim.
You can also request a Subject Access Request (SAR) from your lender. This will provide details of how your deal was structured. If you find evidence of unfair charges, you can escalate your case through the Financial Ombudsman Service (FOS).
What Should You Do Next?
- Gather your finance documents – Locate your contract and check for commission details.
- Contact your lender – Ask if they used discretionary commission models and request a breakdown of interest charges.
- Submit a complaint – If you believe you were overcharged, lodge a formal complaint with the finance provider.
- Escalate if needed – If your lender rejects your claim, take it to the Financial Ombudsman Service.
With the FCA’s crackdown, lenders could be forced to set aside billions in refunds. If you’ve had car finance in the past, now is the time to check if you’re owed money.
