car finance mis selling uk

The UK is currently addressing a significant car finance mis-selling scandal that could lead to billions in compensation for consumers. Here's an overview of the situation:

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### 🚗 What Happened?

Between 2007 and January 2021, many car buyers in the UK entered into finance agreements—such as Personal Contract Purchase (PCP) or Hire Purchase (HP)—that included Discretionary Commission Arrangements (DCAs). These arrangements allowed car dealers to set higher interest rates, increasing their commissions, often without fully informing customers.

In October 2024, the UK Court of Appeal ruled that paying commissions to car dealers without the borrower's informed consent was unlawful. This decision expanded the scope of potential mis-selling beyond DCAs, suggesting that many finance agreements might have been mis-sold.

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### ⚖️ Legal and Regulatory Developments

* Supreme Court Appeal: Lenders like Close Brothers and MotoNovo have appealed the Court of Appeal's decision. The Supreme Court hearing occurred in April 2025, with a ruling expected soon.

* FCA Investigation: The Financial Conduct Authority (FCA) is investigating the extent of the mis-selling. Depending on the Supreme Court's decision, the FCA may implement a compensation scheme.

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### 💰 Potential Compensation

* Industry Estimates: Analysts estimate that compensation could range from £6 billion to £46 billion, depending on the Supreme Court's ruling.

* Bank Provisions: Major banks, including Lloyds Banking Group, Santander, and Barclays, have set aside significant funds in anticipation of potential payouts.

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### 🧾 How to Determine If You're Affected

You might be eligible for compensation if:

* You entered into a car finance agreement before January 28, 2021.

* Your agreement included a commission paid to the dealer that wasn't fully disclosed.

To check, review your finance documents or contact your lender to inquire about any commission arrangements.

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### 📝 Making a Claim

1. Contact Your Lender: Reach out to your car finance provider to inquire about commission arrangements.

2. File a Complaint: If you believe you were mis-sold, submit a formal complaint to your lender. Due to the volume of cases, the FCA has extended the response time to 45 weeks.

3. Escalate if Necessary: If unsatisfied with the response, you can escalate the complaint to the Financial Ombudsman Service.

Caution: Be wary of claims management companies that charge fees for services you can perform yourself.

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### 📅 Timeline

* January 2021: FCA bans DCAs.

* January 2024: FCA launches investigation into historical commission arrangements.

* October 2024: Court of Appeal rules undisclosed commissions unlawful.

* April 2025: Supreme Court hears appeal; decision pending.

* May 2025: FCA to announce next steps post-Supreme Court ruling.

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