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The FCA's investigation into hidden car finance commission is one of the most significant regulatory actions in UK financial services since PPI. It has been running since January 2024, has involved legal proceedings all the way to the Supreme Court, and has resulted in an estimated £8 billion redress scheme affecting 14 million agreements. Here is the full story.
For most of the 2000s and 2010s, buying a car on finance in the UK involved a hidden element that most customers never knew about. The dealer sitting across the table from you was not just selling you a car — they were also earning a commission from the lender that could be made larger simply by increasing the interest rate on your agreement. You were not told. You could not negotiate. And regulators did not step in for years.
The consequences of this practice are now being addressed through one of the UK's largest ever consumer financial redress exercises.
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Why Did the FCA Launch the Investigation?
The FCA had been aware of concerns about motor finance commission for some years before the investigation began. The trigger came in January 2024, when the Financial Ombudsman Service ruled against Barclays Partner Finance in a case involving a DCA. The FOS found that Barclays had treated a customer unfairly by failing to disclose a commission arrangement.
This decision prompted the FCA to launch a formal, sector-wide investigation using its enhanced investigatory powers. The regulator announced its intention to examine historical DCA practices across the motor finance industry, requiring major lenders to provide data on their commission arrangements and customer outcomes.
FCA Chief Executive Nikhil Rathi stated publicly in March 2024 that it was "improbable" the investigation would find nothing to report. That statement was widely interpreted as a signal that the regulator already had substantial evidence of widespread misconduct.
What Did the Investigation Find?
The FCA's investigation confirmed what consumer campaigners had long suspected: that discretionary commission arrangements were used on a widespread, systemic basis across the motor finance industry, and that customers were routinely not told about them.
The investigation found that firms broke the regulator's rules by failing to properly disclose commission arrangements to customers. The FCA also found that the financial harm to consumers was significant — amounting to billions of pounds in excess interest charges across the eligible period.
The Court of Appeal Ruling: October 2024
While the FCA's investigation was progressing, a parallel legal case was moving through the courts. Two motor finance lenders — Close Brothers and Motonovo (FirstRand Bank) — were the subject of a Court of Appeal hearing involving customers who had complained about undisclosed commission arrangements.
In October 2024, the Court of Appeal issued a landmark ruling: car finance companies could not lawfully receive or pay commission without the customer's fully informed consent. Crucially, the court applied this standard not only to DCAs but to all types of commission arrangements. This significantly widened the universe of potential claims.
The ruling was described by Martin Lewis of MoneySavingExpert as one of the most significant consumer finance decisions in a generation. It more than doubled the number of people who could potentially claim.
The Supreme Court Decision: August 2025
Close Brothers and Motonovo appealed the Court of Appeal ruling to the Supreme Court. The Supreme Court heard the case in April 2025 and delivered its judgment in August 2025.
The Supreme Court partially overturned the Court of Appeal decision, ruling that a hidden commission arrangement was not automatically unlawful simply because it was not disclosed. However, it confirmed that such arrangements could be unlawful where a range of factors made them unfair — including the amount of the commission, the failure to disclose it, and misleading conduct by the dealer.
For DCA cases — the core of the FCA investigation — the Supreme Court's ruling did not fundamentally change the legal position. DCA arrangements are widely expected to meet the unfairness threshold confirmed by the Supreme Court, and the FCA proceeded to finalise its redress scheme on that basis.
The FCA's Response and the Path to Redress
Following the Supreme Court ruling, the FCA moved quickly to confirm its approach. In October 2025, the FCA published a detailed consultation on the proposed redress scheme. In March 2026, it confirmed final rules would be published by end of that month, with the scheme launching shortly thereafter.
The FCA also launched a £1 million public awareness campaign to ensure consumers understood their rights and knew they could complain directly without needing a CMC.
For the full timeline of events, see our dedicated FCA Car Finance Investigation Timeline page.
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What This Means for Your Claim
The FCA investigation has established beyond doubt that hidden commission practices were widespread in car finance between 2007 and 2021. The legal framework — confirmed by the Supreme Court — provides a clear basis for compensation in DCA cases. The redress scheme is the mechanism through which that compensation will be paid.
If you had a PCP or HP agreement during the relevant period and you were not told about a commission arrangement, you have strong grounds for a claim. PCP Missold has been preparing for this moment since the investigation began and can handle your claim efficiently and professionally.
