Thousands of UK drivers may have been mis-sold car finance deals without knowing their rights. A major investigation has revealed that some lenders charged hidden fees, leading to excessive interest payments. If you financed a car with PCP or HP between 2014 and 2021, you may be eligible for a refund.
The Financial Conduct Authority (FCA) launched an inquiry into the car finance sector in 2019. It found that some dealerships and lenders used unfair commission structures that inflated borrowing costs. Many consumers were unaware that salespeople earned more commission by increasing interest rates on PCP and HP agreements.
How Mis-Selling Happened and What It Means for Borrowers
Car finance mis-selling occurs when lenders fail to provide full transparency on costs and commissions. In many cases, customers weren’t told that their interest rates were negotiable. Instead, brokers and dealers used discretionary commission models to push up costs for higher earnings.
This lack of transparency has prompted thousands of drivers to question whether they were overcharged. If your lender failed to explain the terms properly, you could have a strong case for compensation. Reviewing your original finance agreement is the first step in checking if you were mis-sold.
How to Check If You Have a Mis-Sold Car Finance Deal
Start by reviewing the paperwork from your car finance agreement. Check whether the dealer disclosed commission details and if the interest rate seemed high. If you weren’t informed about how your rate was set, you may have grounds for a claim.
Another red flag is if the monthly repayments were higher than expected despite a good credit score. Some drivers later discovered they were charged extra because of hidden commissions. If this happened to you, gathering evidence will help strengthen your case for a refund.
Who Can Make a Claim for Compensation?
If you financed a vehicle using a Personal Contract Purchase (PCP) or Hire Purchase (HP), you could be eligible. Claims are open to individuals who took out agreements from 2014 onwards, provided mis-selling can be proven. The FCA’s investigation covers a wide range of lenders, including banks and specialist car finance firms.
Even if your agreement has ended, you may still have the right to claim. Many drivers are only now realising they overpaid due to misleading sales tactics. If your dealer failed to give clear financial advice, you should consider seeking compensation.
How Much Compensation Could You Receive?
The amount you could reclaim depends on the excess interest and fees you were charged. Some claims have resulted in refunds of several thousand pounds. If you paid more than you should have, compensation could cover the difference, plus potential interest.
Legal experts suggest that millions of drivers could collectively reclaim billions in refunds. If your lender misled you, a successful claim could result in the removal of excess charges. This means you could either receive a refund or have outstanding payments reduced.
How to Make a Car Finance Claim
- Gather Your Documents: Locate your car finance agreement and check for hidden fees or commission details.
- Contact Your Lender: Ask whether they used a discretionary commission model on your deal.
- File a Complaint: If your lender does not resolve the issue, escalate it to the Financial Ombudsman Service (FOS).
- Seek Legal Help: Some financial claims firms specialise in car finance mis-selling and offer no-win, no-fee services.
What If Your Lender Refuses to Pay Compensation?
If your lender denies wrongdoing, you can escalate your complaint to the Financial Ombudsman Service (FOS). The FOS can investigate cases and force lenders to refund unfair charges. Many consumers have successfully reclaimed money after challenging finance agreements.
In some cases, legal action may be required if lenders refuse to cooperate. If you believe you were mis-sold, professional claims services can handle the process for you. However, be cautious of companies that charge high fees, as you can claim directly at no cost.
Final Thoughts
With growing evidence of widespread mis-selling, reviewing past agreements is crucial. If your finance deal was unfair, you could be entitled to a refund worth thousands. Checking your paperwork takes only a few minutes, but it could save you a fortune.
One case worth noting involves a Close Brothers PCP claim, where customers successfully challenged unfair finance agreements. If you had a PCP deal with Close Brothers or another lender, it’s worth investigating your options.
The FCA’s findings suggest that millions of drivers may have been overcharged on car finance. Acting now could help you recover money that was unfairly taken from you. Don’t wait—review your agreement and start your claim today.
