Mis-sold PCP and HP Finance Claims

If you have purchased a vehicle (cars, vans, caravan, motorbike, boat, plane, or any other type of motor vehicle) using a finance agreement BEFORE 28 JANUARY 2021, then you could be one of thousands of UK vehicle owners that could have been mis-sold by use of a discretionary commission arrangement (DCA).

This type of mis-selling affects different types of finance agreements, namely:

Personal Contract Purchase (PCP) Agreements
Hire Purchase (HP) Agreements

An investigation by the UK financial services regulator, the Financial Conduct Authority (FCA), is currently underway.

The FCA is looking into whether widespread mis-selling of PCP and HP finance agreements has taken place. The FCA has announced that they intend to set out their next steps in their review of discretionary commission arrangements until May 2025

- FCA update on motor finance work

- FCA update on motor finance work

What are Discretionary Commission Arrangements (DCAs)?

DCAs are finance arrangements where a broker’s commission is linked to the interest rate that the customer pays on the loan.

However, what makes these types of arrangements particularly unfair is that the interest rates on the loans were set or adjusted by the broker’s themselves. Furthermore, the higher the interest rate, the higher the commission the broker typically received from the lender.

This type of financing practice effectively incentivised brokers to arrange loans with higher rates of interest – increasing the cost of financing to the customer.

For example, some estimates indicated that customers overpaid more than £1,100 on interest charges over the term of the loan when the motor finance arrangement was for £10,000.

There is nothing wrong with these arrangements, in fact they are often used in financing deals. However, the key problem is that when this practice is used, it is necessary to fully disclose the arrangement to the customer, so that they can make a fully informed decision as to whether they want to accept this arrangement or not.

Typically and in most cases, this practice was never disclosed.

What has happened regarding PCP Mis-selling

Timeline of Events

January 2021

In January 2021, the financial regulator, known as the Financial Conduct Authority (FCA), banned a form of finance plan that contained ‘discretionary commission arrangements‘ (DCAs).

This ban effectively put a stop to lenders allowing finance brokers (and car dealers) to set the interest rates on car finance themselves. Typically, the higher the interest rate set then the higher the potential commission the brokers and car dealers would get paid. In most cases, the car buyer was not told about this arrangement between the lender and the broker, but rather thought that the interest rate was fixed and non-negotiable.

Obviously there are potential and real conflicts of interest in this practice. Ultimately, this practice was not fair for the consumer.

11^th January 2024

On 11 January 2024, the FCA announced a ‘major investigation’ into these practices. This will include a thorough public investigation, and the collection of large amounts of evidence. Using its investigatory powers, the FCA has ordered firms to co-operate in this investigation and provide the necessary documentation where required.

25^th October 2024

On 25 October 2024, the Court of Appeal handed down their judgement in favour of the claimants (or consumers) over car finance firms.

Although potentially subject to an appeal in the Supreme Court, the judgement unanimously found in favour of the claimants (3-0). This judgement has set a judicial precedent and ruled that a finance broker could not lawfully receive commission from the finance firm unless they had received the consumers ‘fully informed consent’.

In order to reach this standard of consent, it is likely that the the consumer would have had to been told of all the material facts of the lending arrangement and loan product, which would have included how much the commission payment was, how it was calculated and how it would be paid.

May 2025

The current FCA investigation is due to be completed in May 2025. After the FCA reports on its findings, it may well announce a large scale mass compensation scheme. Although this is yet to be confirmed.

What does this mean? The Court of Appeal Judgement potentially increases the likelihood of compensation being paid to consumers that used PCP and HP finance plans. In fact, one of the reasons that the FCA changed its investigation deadline from September 2024 to May 2025 was to see how the courts would rule. No doubt the Court of Appeal judgement strengthens that case in favour of consumers.

PCP mis-selling checklist

Ask yourself these questions to see if you have a claim.

Did you purchase your motor vehicle on finance?

Motor vehicle can include vehicles such as cars, vans, camper vans, caravans, motorbikes, boats and even planes.

Was the finance agreement taken out before 28th January 2021 and after April 2007?

Was the vehicle that you purchased used primarily for personal and not business use?

Personal use includes commuting to and from work. If you paid for the car using a business account, then it probably will not be included.

Was the finance deal a Personal Contract Purchase (PCP)?

A PCP is when you make repayments like a loan, but with the option of a large ‘balloon’ payment at the end of the agreement if you wanted to won the car outright.

Was the finance deal an Hire Purchase (HP) agreement?

This is where you pay off the total purchase price of the car in monthly installments.

Have you already paid off the car in full?

If so, you can still claim even if the finance agreement has come to an end. Amazingly, you can still claim even if your car has been repossessed!

Did you have multiple car finance deals?

If you had multiple car finance deals, then you are potentially able to make multiple claims and therefore receive multiple payouts. This is because each claim is considered independently on its own merits.

Note that if you had multiple agreements with the same firm, then you can make a single complaint to that firm and they will consider all of your complaints together.

If you took out finance deals with different firms, then you will need to complaint to each firm separately.

FCA Review into Motor Finance

For some time, the FCA has been conducting a review into the use of discretionary commission arrangements (DCAs) in the motor finance industry.

They have announced that they will release their findings of the review in May 2025. The review includes firms providing the FCA with their data relating to the use of DCAs in their finance agreements.

The FCA is having to examine over 14 years of records in order to understand how DCAs have affected the cost of credit for people borrowing money to purchase a vehicle.

In parallel to the FCA review are a number of legal and regulatory developments that may impact the assessment and outcome of the FCA review. These developments include:

Judicial Review proceedings of the Financial Ombudsman Service (FOS) instigated by Barclays Partner Finance.

Previously, FOS had upheld a complaint for a consumer relating to the use of DCAs. A hearing of the Judicial Review is yet to take place and it should be decided whether the Judicial Review will be allowed to proceed for the courts to hear the claim.

Court of Appeal Judgement. In October 2024 the Court of Appeal held in favour of three claimants in relation to the use of DCAs in motor finance agreements.

Which car manufacturers are affected by PCP and HP finance plans?

A number of manufacturers were active in selling cars and other vehicles through PCP and HP finance plans.

If you purchased a vehicle using PCP or HP finance with any of these manufacturers before 28 January 2021, then you could be eligible to claim for a refund if your claim is successful.

These manufacturers provided PCP financing plans using Discretionary Commission Arrangements (DCAs), which have been banned by the Financial Conduct Authority (FCA) since January 2021.

A list of these manufacturers include:

Which finance firms or lenders sold PCP and HP finance plans

The list of firms below were particularly active in the UK vehicle finance market before 28 January 2021.

If your PCP or HP Finance product was supplied by one of the following lenders, then there is a very good chance that you could have a valid claim.

Check the details of your agreement to see who the finance provider is.

PCPFinanceClaims.NET