Can I still make a complaint about car finance commission?

Yes, you can still submit a complaint to your lender or broker if you believe you were mis-sold car finance. However, the FCA has paused the requirement for firms to provide a final response until the legal challenges are resolved in 2027. Submitting your complaint now ensures it is on the record and ready for processing once the pause is lifted.

What is a Discretionary Commission Arrangement?

A Discretionary Commission Arrangement (DCA) is a contractual agreement where a finance lender allowed a car dealer to choose the interest rate for a customer's finance deal. The dealer would receive a higher commission if they charged the customer a higher interest rate. This practice was banned in the UK in January 2021.

How do I check if my car finance had hidden commission?

To check for hidden commission, you should review your original credit agreement or contact your finance provider directly. You can specifically ask if your agreement included a Discretionary Commission Arrangement. Many consumer groups and the FCA provide template letters to help you request this information from lenders like Black Horse, Santander Consumer Finance, or MotoNovo.

Will the car finance delay affect my credit score?

No, submitting a complaint about historical car finance commission or being part of the compensation scheme will not affect your credit score. These are consumer rights issues and do not reflect your ability to repay debt. Your credit file remains protected during the investigation and compensation process.

Why Is the Car Finance Compensation Scheme Delayed and What Does It Mean for Drivers?

What is the FCA car finance compensation scheme?

The FCA car finance compensation scheme is a regulatory investigation into the historical use of Discretionary Commission Arrangements (DCAs) by motor finance lenders. This scheme aims to determine if lenders and car dealers unfairly inflated interest rates for consumers to increase their own commission payments between 2007 and 2021.

Discretionary Commission Arrangements are specific agreements where a lender allowed a car dealer to adjust the interest rate offered to a customer. This practice created a conflict of interest because the dealer earned a higher commission for every percentage point added to the customer's finance rate. The Financial Conduct Authority (FCA) banned this practice in January 2021 to protect consumers from hidden costs.

12 Million

Agreements Impacted

£829

Average Expected Payout

2027

New Deadline for Payouts

Why has the car finance compensation deadline been moved to 2027?

The deadline for car finance compensation has been delayed until May 2027 due to significant legal challenges following a landmark Court of Appeal ruling. This ruling determined that it is unlawful for a car dealer to receive a commission from a lender without the customer's fully informed and documented consent.

Lenders including Lloyds Banking Group and Close Brothers have sought permission to appeal this decision to the Supreme Court. The FCA has extended the pause on complaint handling to allow the legal process to conclude before finalising the redress scheme. This extension ensures that any final compensation rules are based on a definitive legal framework established by the highest courts in the UK.

The pause will allow for the Supreme Court to decide whether it will grant permission to appeal and, if it does, the time needed to hear the appeal and give its judgment.
Financial Conduct Authority (FCA)

Who is eligible for a car finance refund?

Eligibility for a car finance refund generally applies to individuals who purchased a vehicle using Personal Contract Purchase (PCP) or Hire Purchase (HP) agreements before 28 January 2021. The agreement must have involved a Discretionary Commission Arrangement where the broker or dealer had the power to set the interest rate.

Eligible Timeframe
Agreements must have been signed between 6 April 2007 and 27 January 2021.
Vehicle Types
The scheme covers cars, vans, motorhomes, and motorcycles for personal or business use.
Leasing Exclusion
Standard Personal Contract Hire (PCH) or business contract hire agreements without a purchase option are typically excluded from this specific DCA probe.

Car leasing prices are dropping

How legal challenges impact current leasing agreements

Current legal challenges have prompted a shift in how car finance and leasing products are marketed and managed in the UK. Lenders are now required to provide much higher levels of transparency regarding commission structures and total costs of credit. For drivers looking for stability, modern leasing models often provide a clearer path than traditional finance.

Personal Contract Hire (PCH) is a form of car leasing where you pay a fixed monthly fee to use a vehicle for a set period. Unlike PCP agreements affected by the DCA probe, PCH agreements usually do not involve the customer taking ownership of the car at the end. This distinction makes the pricing structure straightforward and less susceptible to the historical commission issues currently under investigation.

Comparison of finance types under current FCA scrutiny.
Feature	Personal Contract Purchase (PCP)	Personal Contract Hire (PCH)
Ownership Option	Yes, after a balloon payment	No, vehicle is returned
Commission Risks	High historical risk (Pre-2021)	Low risk, transparent monthly fee
Current FCA Status	Subject to DCA investigation	Generally excluded from DCA probe
Price Predictability	Variable based on interest/APR	Fixed monthly rentals

Low Benefit-in-Kind (BIK) rates

The Financial Impact on the UK Automotive Market

Adhere to the ZEV mandate

The total cost of the car finance scandal could reach billions of pounds, with some analysts estimating a total industry liability exceeding £16 billion. This financial pressure on lenders could lead to tighter lending criteria and higher interest rates for new finance agreements in the short term.

£1.1 Billion

Amount already set aside by Lloyds Banking Group to cover potential car finance compensation costs.

View source

As the market adjusts to these regulatory changes, many drivers are exploring more predictable options. Leasing offers an alternative that bypasses many of the complexities found in the legacy PCP market. This transition is particularly relevant for those looking at electric vehicles, where battery technology and resale values are managed by the leasing provider rather than the individual driver.

Our Take

The delay to 2027 creates a period of uncertainty for millions of drivers, but it also highlights the value of modern leasing models. We observe that fixed-cost contract hire provides the transparency consumers are now demanding, as it removes the hidden variables often found in commission-driven finance products. By moving away from ownership-focused debt, drivers can focus on the vehicle's utility and the benefits of newer, cleaner technology.

Transitioning to Electric: The Role of Transparent Leasing

While the car finance world navigates legal hurdles, the transition to electric vehicles remains a priority for UK drivers. Transparent leasing agreements are essential for this shift, as they allow businesses and individuals to benefit from low Benefit-in-Kind (BIK) rates without the risk of hidden commission charges. Electric vehicle leasing provides a fixed-cost solution that helps mitigate the volatility of the used car market.

For business owners, leasing an EV is an effective way to manage cash flow while adhering to the ZEV mandate. These mandates require a growing percentage of new car sales to be zero-emission vehicles annually. By choosing a lease with a reputable provider, drivers ensure they are receiving value based on current market rates rather than historical commission structures that favoured the dealer over the consumer.