The UK’s car finance sector is currently under intense scrutiny due to recent court decisions addressing the mis-selling of Personal Contract Purchase (PCP) agreements. These rulings have significant implications for consumers and lenders alike, potentially leading to substantial compensation claims and industry-wide reforms.
Understanding PCP Mis-Selling
PCP agreements have been a popular method for financing vehicle purchases, allowing consumers to make an initial deposit followed by monthly payments, with the option to buy the car outright at the end of the term. However, concerns have emerged regarding the transparency of these deals, particularly about undisclosed commissions paid to brokers and dealers, which may have influenced the terms offered to consumers.
Landmark Court of Appeal Ruling
In October 2024, the Court of Appeal delivered a pivotal judgment in favour of consumers, ruling that it was unlawful for lenders to pay commissions to car dealers without the borrowers’ knowledge. This decision stemmed from cases where consumers were unaware that brokers received commissions that could affect the interest rates on their loans. The court emphasised that consumers must be informed of any commissions to provide fully informed consent to the loan terms.
Implications for the Car Finance Industry
This ruling has opened the door to a wave of compensation claims, with estimates suggesting that lenders could face liabilities amounting to billions of pounds. The Financial Conduct Authority (FCA) is investigating commission arrangements made between 2007 and 2021—the year such practices were banned—to determine their impact on consumers. The FCA’s findings, expected by May 2025, could lead to a compensation scheme funded by the lenders involved.
Barclays’ Legal Challenge
Adding to the industry’s challenges, Barclays recently lost a legal challenge against a Financial Ombudsman Service (FOS) decision that upheld a car finance mis-selling complaint. The FOS found that Barclays had failed to treat a customer fairly by not disclosing a £1,320 commission paid to the broker arranging the finance. The court dismissed Barclays’ claim, reinforcing the expectation of transparency in commission disclosures.
Consumer Actions and Potential Compensation
These legal developments have empowered consumers to scrutinise their car finance agreements more closely. Individuals who believe they were mis-sold PCP agreements due to undisclosed commissions or unfair terms are encouraged to seek legal advice. Compensation could include refunds of interest paid, reductions in outstanding balances, or even rescission of the loan agreement. Estimates suggest that millions of consumers may qualify for compensation, with potential payouts averaging £1,000 per car, leading to a total industry liability that could surpass previous mis-selling scandals.
Mis-sold Vehicle Finance Claims Checker
Our mis-sold car finance claims calculator below estimates the level of compensation you may be able to reclaim for a mis-sold car finance agreement.
Add the value of your vehicle, the length of your agreement, and the interest rate you paid to the calculator below. Then, compare this against a rate that you may have been offered if you weren’t mis-sold.
Disclaimer : The Mis-sold Car Finance Claims calculation is illustrative, and under no circumstances should it be used or relied upon in the pursuit of a claim. If you need more help and clear understanding Contact National Claims.
Industry Response and Future Outlook
In response to these rulings, some lenders have paused issuing new car loans to review their practices, and the FCA has indicated it may adjust its oversight of car finance agreements to enhance consumer protections. The Supreme Court is also set to hear appeals from lenders challenging these decisions, with outcomes that could further influence the industry’s regulatory landscape.
Conclusion
The recent court decisions mark a significant shift in the UK’s car finance sector, highlighting the necessity for transparency and fairness in financial agreements. Consumers are advised to review their PCP agreements and seek professional advice if they suspect mis-selling. As the industry adapts to these legal precedents, further developments are anticipated, potentially reshaping the future of car finance in the UK.
Making a Mis-sold Car Finance Deal with National Claims
At National Claims, we understand the financial burden and frustration that can arise from being mis-sold a Personal Contract Purchase (PCP) car finance agreement. If you believe you were misled or overcharged, we’re here to help you seek justice and compensation.
No Win, No Fee
At National Claims, we believe that everyone deserves access to legal support when dealing with mis-sold car finance. That’s why we work on a “No Win, No Fee” basis—meaning you won’t pay any upfront legal fees. The solicitor’s fees are payable only if your claim is successful, allowing you to take action against mis-sold car finance agreements without financial worry.
Customers pay up to 25% to 40% (incl. VAT) of the amount recovered towards solicitor costs, and if you cancel outside your cooling-off period, you may be charged a fee. Whether you’re dealing with a mis-sold car finance claim or seeking justice for other financial issues, our team is here to support you every step of the way.
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