Pillar Guide · Updated July 2026
Car Finance Mis-Selling Complaints: A Practical Guide for 2026/27
Millions of UK car finance agreements taken out before January 2021 may have involved discretionary commission arrangements that gave dealers a financial incentive to charge higher interest rates without telling customers. This pillar guide explains what discretionary commission was, the FCA’s 2021 ban and subsequent redress review, the Supreme Court case law behind it, how to check if you were affected, and the step-by-step process for complaining to your lender and, if necessary, the Financial Ombudsman Service.
What Was Discretionary Commission
A discretionary commission arrangement (DCA) allowed a car dealer, acting as the broker who arranged the customer’s finance, to choose the interest rate charged on the agreement within a range set by the lender — and to earn a higher commission the higher the rate they selected. This gave dealers a direct, largely undisclosed financial incentive to charge customers more than necessary for their car finance, without customers being told the rate was negotiable or how commission was calculated.
DCAs were used widely across the UK motor finance industry on both PCP and HP agreements, spanning many different lenders and dealership groups, for a period estimated to run from at least the mid-2000s through to the FCA’s ban in January 2021. Because the arrangement was rarely explained clearly in the paperwork, affected customers usually had no reason to suspect anything unusual about their agreement at the time.
The core consumer harm is straightforward: many customers likely paid a higher rate of interest than they would have under a fair, disclosed commission structure, without any opportunity to negotiate or shop around based on accurate information.
The FCA Ban and Review
The Financial Conduct Authority banned discretionary commission models in motor finance from 28 January 2021, requiring lenders to move to fixed-fee or scaled commission structures that remove the broker’s incentive to inflate the customer’s interest rate. This ban addressed the practice going forward but did not itself compensate anyone affected by agreements taken out before that date.
Following growing evidence of historic harm and a rising volume of individual complaints and Financial Ombudsman Service decisions, the FCA opened a formal, industry-wide review into historic motor finance commission arrangements. The review has considered whether a structured, sector-wide redress scheme — comparable in scale and approach to the historic Payment Protection Insurance (PPI) redress programme — is appropriate, and has periodically updated its guidance and timetable as the position has developed.
Given the scale of the potential industry exposure, several major lenders have set aside significant financial provisions in their accounts in anticipation of redress obligations, reflecting the scale regulators and lenders themselves expect this issue to reach.
Court Rulings
Alongside the regulatory review, a series of court cases — reaching the Court of Appeal and subsequently the Supreme Court — examined whether dealers owed a duty to disclose commission arrangements to customers, and whether undisclosed or "secret" commission could render a finance agreement unfair under section 140A of the Consumer Credit Act 1974, or give rise to a claim in bribery/secret commission law more broadly.
These rulings have materially shaped how lenders, the FCA and the Financial Ombudsman Service approach individual complaints, generally reinforcing the principle that a lack of adequate disclosure about commission — and particularly about a broker’s discretion to set the rate — can support a claim for unfairness and redress, even where the underlying agreement was not otherwise defective.
How to Check If You Were Affected
You may be affected if you took out car finance — PCP or HP — through a dealership before 28 January 2021, and the dealer arranged the finance as a credit broker. You do not need to have noticed anything wrong at the time; DCAs were typically not clearly explained. The clearest way to check is to contact the lender named on your original finance agreement (visible on your paperwork or statements) directly and ask specifically whether a discretionary commission arrangement applied to your deal — lenders are required to respond to this type of request.
If you no longer have the original paperwork, the lender should still be able to locate your agreement using your name, address history, and approximate dates, or you may be able to obtain a copy through a credit reference agency file review or a subject access request to the lender.
How to Complain
Complain in writing directly to the lender (not the dealership, though it may also be relevant), explaining that you believe a discretionary commission arrangement or undisclosed commission may have applied to your agreement and that you were not informed how the interest rate was determined. Include your agreement reference number, the dealership name, and approximate purchase date if you have it.
The lender must acknowledge your complaint and issue a final response, generally within 8 weeks under standard FCA complaint-handling rules, though the FCA has at various points extended this timescale specifically for motor finance commission complaints to allow the wider industry review to progress — check the current position on the FCA’s website if your complaint has been paused or delayed.
Escalating to the Ombudsman
If the lender rejects your complaint, or fails to respond within the applicable time limit, you can refer the complaint free of charge to the Financial Ombudsman Service. The Ombudsman investigates independently and has already upheld a substantial number of DCA-related complaints, ordering lenders to refund excess interest plus simple interest (commonly around 8% per year) on the redress amount.
There is generally a 6-year time limit from the date of the agreement (or 3 years from when you knew, or reasonably should have known, of a possible problem) to refer a complaint, though the evolving regulatory position on motor finance complaints means it is worth checking the current FOS guidance rather than assuming a standard deadline applies without confirmation.
Claims Companies vs Doing It Yourself
You do not need a claims management company (CMC) or solicitor to make a complaint — contacting the lender directly, and escalating to the Financial Ombudsman Service if needed, is free. CMCs and "no win, no fee" solicitors typically charge a percentage of any redress awarded, often in the region of 20-30% plus VAT, for handling a process most people can complete themselves with a couple of letters.
Using a CMC may suit those who want practical help gathering old paperwork or lack confidence pursuing the complaint personally, but going direct means keeping the full amount of any compensation awarded.
What Compensation Looks Like
Where a complaint is upheld, typical redress is a refund of the excess interest paid as a result of the discretionary commission structure — the difference between what was actually charged and a reasonable estimate of what a fair, non-discretionary rate would have been — plus simple interest on that overpayment from the time it was paid until settlement, commonly calculated at around 8% per year in line with standard FOS redress practice.
There is no single, universal payout figure, since the amount depends on the size and term of the specific agreement and how much higher the actual rate was than a reasonable comparator — outcomes vary significantly between individual cases, unlike some flat-rate historic redress schemes.