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Millions of UK drivers took out a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement to buy their car, often without knowing that the dealer arranging the finance could earn a commission linked to the interest rate they charged. Following a lengthy Financial Conduct Authority (FCA) investigation, this practice, known as a discretionary commission arrangement (DCA), has been found to have affected agreements taken out between 2007 and 2021.
This guide brings together everything covered across our site: how PCP and HP finance works, what the FCA found, who is affected, which lenders are involved, and what happens if you make a claim. Use the links throughout to explore any topic in more depth, or check your agreement now to find out whether it may qualify.
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What Is PCP and HP Car Finance?
PCP and HP are the two most common ways UK drivers finance a car. With a Personal Contract Purchase agreement, you pay an initial deposit followed by monthly instalments that cover the car's depreciation over the agreement term, then choose whether to pay a final balloon payment to own the car outright, hand it back, or trade it in. With Hire Purchase, your monthly payments are structured to pay off the full value of the car, and you own it once the final instalment is made.
Both are regulated consumer credit agreements, and both could have carried a hidden commission arrangement if they were taken out through a dealership before the practice was banned. In practice, the finance was arranged by the dealer or a broker acting on the lender's behalf rather than by the lender directly, which is why claims are made against the finance company rather than the dealership itself.
The key difference between the two is what happens at the end of the agreement. With PCP, you decide whether to make the optional final payment and keep the car, hand it back, or use any remaining equity toward a new deal. With HP, ownership passes to you automatically once the agreed instalments are complete. Both structures were widely used across the same period, and both are covered by the FCA's review wherever a hidden commission was involved. For a fuller breakdown of how the finance itself is structured, see our page on how PCP and HP claims work, or read our guide to what a PCP claim is and who can make one.
How Car Finance Was Mis-Sold: Hidden Commission
Before the FCA banned the practice on 28 January 2021, many car dealers were allowed to set the interest rate on a customer's finance agreement within a range set by the lender. The higher the rate the dealer charged, the more commission they earned, a structure known as a discretionary commission arrangement (DCA). In many cases, customers were never told this arrangement existed, or that a lower rate might have been available elsewhere.
The FCA's own findings, published in 2019, concluded that this lack of transparency was widespread across the industry rather than limited to a handful of dealers, and that customers were rarely, if ever, given a genuine opportunity to understand how the rate they were offered had been set. This is the central issue at the heart of most claims: not that commission was paid, which is common and legal in many forms of lending, but that customers were not told about it in a way that let them make an informed decision.
DCAs were not the only way commission could be hidden from a customer. Some agreements involved other commission structures that regulators have since grouped together under the same review. Our complete guide to discretionary commission arrangements explains how DCAs worked in detail, while hidden commission in car finance explained and the three types of hidden commission set out the different arrangements the FCA's redress scheme now covers.
The FCA Investigation and the Motor Finance Redress Scheme
The FCA launched a formal review of motor finance commission arrangements in January 2024, following a sharp rise in customer complaints. The investigation moved through the courts, including a Court of Appeal ruling and a subsequent Supreme Court judgment, before the FCA confirmed the final rules for a motor finance redress scheme in its policy statement PS26/3, published in March 2026.
Because the case was working its way through the courts at the same time as the FCA's own review, lenders were given a temporary pause on responding to certain motor finance complaints while the legal position was clarified. That pause has since lifted following the confirmation of PS26/3, and lenders are now expected to assess complaints, and in many cases proactively contact affected customers, in line with the scheme's rules and timelines.
For the full sequence of events, see our FCA car finance investigation page and the regularly updated full investigation timeline. The redress scheme itself is explained in motor finance redress scheme and, in more detail, PS26/3: the final rules explained.
If you want to understand what the scheme could mean for your own agreement, our articles on what the redress scheme means for your claim and what the FCA's 2026 scheme means for you walk through it step by step.
The wider legal and political backdrop
The scheme did not arrive without dispute. The government's attempt to intervene in the case was blocked by the Supreme Court, clearing the way for the FCA to press ahead. Our coverage of how millions could be owed compensation and the major developments in the wider scandal tracks how the story developed.
Wondering where your own agreement stands?
The rules are now confirmed. Find out whether your agreement falls within the qualifying period.
Signs Your Agreement May Have Been Mis-Sold
Not every PCP or HP agreement involved mis-selling, but certain signs are worth checking for. These include a dealer who never mentioned commission, a sales process that moved quickly through the finance paperwork, no discussion of alternative lenders or rates, or a sense that the interest rate seemed high compared with similar deals at the time.
It is also worth thinking back to how much choice you were given at the point of sale. Were you shown more than one finance option, or presented with a single deal as if it were the only one available? Did the paperwork explain how the interest rate had been calculated, or did it move straight from the headline monthly payment to a signature? None of these questions can confirm mis-selling on their own, but taken together they can indicate whether a fuller review is worthwhile.
Our guide to PCP mis-selling red flags drivers should know covers these signs in more depth, and how to check if you have a valid PCP claim walks through a simple self-check. If you would prefer a fuller picture first, our guide to indications of mis-selling, eligibility and steps brings the whole process together in one place.
Am I Eligible to Claim?
Broadly, an agreement may be worth reviewing if it was a PCP or HP agreement taken out between 2007 and 2021, and a commission was paid to the dealer or broker that was not properly disclosed to you at the time. It does not matter whether the car has since been sold, the agreement has ended, or the balloon payment was already paid. If you financed more than one car during that period, each agreement can usually be looked at separately.
Our article on whether you're eligible for a PCP refund sets out the full criteria, and the PCP claim eligibility checker lets you work through five quick questions. For a general overview of who is affected, see mis-sold car finance claims.
Eligibility ultimately depends on the specific details of your agreement, including which lender was involved, how the commission was structured, and what you were told at the time. This is why every case needs an individual assessment rather than a general rule of thumb, and why no article or calculator can confirm eligibility on its own. Checking is free and does not commit you to anything further.
Which Lenders Are Involved?
Hidden commission was not limited to a single lender. It was a practice used across much of the motor finance industry, and the FCA's review covers agreements from a wide range of providers. Lenders we cover in detail on our lenders hub include Barclays Partner Finance, MotoNovo and FirstRand Bank, Close Brothers Motor Finance, Santander Consumer Finance, and Lloyds Banking Group (Black Horse).
This is not an exhaustive list. If your lender is not named here, that does not automatically rule out a claim; the same commission structures were used far more widely across the industry, including by smaller finance houses and captive lenders tied to specific car brands. For lender-specific guidance, see MotoNovo PCP claims: what you need to know and how to make a Close Brothers PCP claim.
Because so many agreements were arranged through the same handful of dealer networks and lending panels, it is common for one household to have used more than one of the lenders above across different vehicles over the years. If that applies to you, each agreement and each lender relationship can generally be looked at as its own claim.
How Much Compensation Could Be Involved?
The FCA's redress scheme, set out in PS26/3, uses a hybrid remedy formula to work out compensation, taking into account factors such as the amount financed, the type and level of commission involved, the length of the agreement, and the interest rate charged. In an earlier 2019 review, the FCA found that a typical £10,000 agreement with a DCA led to customers being overcharged by an average of around £1,100 over a four-year term, though individual outcomes vary considerably and depend on the details of the specific agreement.
In broad terms, the hybrid remedy looks at both the excess interest a customer paid as a result of the undisclosed commission and, in some cases, an additional element to reflect the wider impact of not being told about it. The exact calculation varies by agreement, and the FCA has built in tolerances to account for how much documentation is still available for older agreements.
Our car finance compensation calculator explains how the hybrid remedy formula works, with worked examples. For a broader look at potential outcomes, see how much car finance compensation could you get and the true cost of a mis-sold PCP agreement. No figure can be confirmed until your specific agreement has been properly assessed.
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How the Claim Process Works
Making a claim typically starts with checking your agreement against the eligibility criteria, then gathering any paperwork you have, such as the finance contract, APR breakdown, or payment records. If you do not have these documents, your lender can usually provide them on request. A complaint is then submitted to the lender, who has a set period to respond. If the complaint is not resolved to your satisfaction, it can be referred to the Financial Ombudsman Service free of charge.
You do not need to use a claims management company to make a complaint; you can contact your lender directly at no cost. Some people prefer to use a professional representative to manage the process on their behalf, particularly where multiple agreements or lenders are involved, or where they simply do not have the time to chase paperwork themselves.
Timescales vary depending on how many complaints a lender is currently processing and where the case sits within the FCA's implementation schedule for PS26/3. Payments are generally expected to be made in waves rather than all at once, so two people with similar claims against different lenders may see quite different timelines. Our simple guide to the PCP claim process walks through each stage, and car finance claim timeline: when will you actually get paid covers the scheme's implementation dates and payment waves in more detail. For more on how we handle claims specifically, see how it works.
Frequently Asked Questions
Do I need to use a claims management company?
No. You can complain directly to your lender for free, and refer the matter to the Financial Ombudsman Service if it is not resolved. Using a claims management company is a choice, not a requirement, though some people prefer the support, particularly with multiple agreements.
What is the qualifying period for a claim?
Generally, agreements taken out between 2007 and 2021 fall within the period the FCA's review covers, as this reflects when discretionary commission arrangements were banned. Whether a specific agreement qualifies still depends on its individual details.
Can I claim on more than one car finance agreement?
Yes. If you financed more than one vehicle during the qualifying period, each agreement is generally assessed on its own merits.
Will I know exactly how much I'm owed before I claim?
No calculator or guide can confirm an exact figure in advance. Compensation depends on the specific terms of your agreement and is only confirmed once it has been properly reviewed.
What happens if my claim is not successful?
If your lender rejects the complaint, you can refer it to the Financial Ombudsman Service free of charge, which will independently review the case.
