If you took out car finance between 2007 and 2021, you may be owed hundreds, or even thousands, of pounds back from your lender. Millions of UK consumers are now asking how to claim car finance commission compensation, and this guide gives you a concrete action plan: how to check eligibility, gather documents, write your own complaint letter, and escalate if the lender says no. You don’t need a solicitor or a claims management company (CMC) to do this, and going DIY means you keep every penny of any payout.
Thank you for reading this post, don't forget to subscribe!What Is a Discretionary Commission Arrangement, and Were You Affected?
How Discretionary Commission Arrangements Worked on Car Loans
A discretionary commission arrangement (DCA) was a pricing model used by car finance lenders that let car dealers set, and inflate, the interest rate on your loan. The higher the rate the dealer set, the more commission they earned. You, the customer, were never told this was happening.
The FCA launched its review of discretionary commission arrangements in January 2021, banning the practice outright after finding that it created a direct conflict of interest: dealers were incentivised to charge you the highest possible interest rate rather than the most suitable one. You paid more so the dealer could earn more.
This wasn’t a niche problem. The FCA estimated that millions of UK consumers took out car finance agreements under discretionary commission arrangements between 2007 and 2021, making it one of the largest potential mis-selling episodes in UK financial services history.
In October 2024, the Court of Appeal ruled in Johnson v Firstrand Bank that lenders owed consumers a fiduciary duty when a hidden commission was paid to a dealer. That ruling set the stage for Supreme Court proceedings in 2025 and the FCA’s market-wide redress scheme, which is now taking shape in 2026.
PCP, HP, and Other Finance Types Covered by the Scandal
PCP and HP agreements are both within scope. The affected finance types include:
- Personal Contract Purchase (PCP), the most common type of new-car finance
- Hire Purchase (HP), where you own the car outright at the end
- Conditional sale agreements, similar structure to HP
If your agreement was arranged through a dealer or broker before January 2021 and involved a commission paid to that dealer, it potentially falls within the DCA review. Leasing and personal loans arranged directly with a bank (not via a dealer) are generally outside scope.
Check Your Eligibility: How to Know If You Have a Mis-Sold Car Finance Claim
Having a PCP or HP agreement does not automatically mean you were mis-sold. You need at least one credible eligibility signal before you have a viable claim.
Key Eligibility Signals to Look For
Work through this self-diagnosis checklist:
- Your finance agreement was signed before 28 January 2021, that is the date the FCA banned DCAs. Agreements after that date fall outside the DCA review.
- The finance was arranged through a car dealer or broker, not applied for directly with a bank or building society.
- Your interest rate was not clearly explained to you, for example, you were told a monthly payment but not how the rate was determined.
- No one told you the dealer would earn commission, and certainly not that the commission depended on the interest rate you were charged.
- Your interest rate was higher than the headline rate advertised by the lender at the time.
If you tick two or more of these boxes, you have a reasonable basis to submit a formal complaint. The lender then has to demonstrate the arrangement was fair, the burden is not entirely on you.
Documents to Gather Before You Submit Your Car Finance Commission Claim
Strong documentation makes the difference between a straightforward payout and a drawn-out dispute. Gather the following before you write a single word of your complaint:
- Original finance agreement, this shows the interest rate, total amount payable, and the lender’s name
- Statements showing total interest paid, useful for calculating your refund amount
- Any correspondence with the dealer or lender, emails, letters, or text messages from the time of sale
- Credit-check paperwork, some lenders included commission disclosure in the small print; having this confirms what you were or weren’t told
- Your vehicle details, registration number, make, model, and the date of purchase
Missing documents? Submit a Subject Access Request (SAR) to your lender. Under UK GDPR Article 15, lenders must provide all personal data they hold about you, including your original finance agreement and any commission arrangements on the account, within 30 calendar days, at no charge. Write to the lender’s data protection officer, quote “Subject Access Request,” and state you want all data relating to your named finance account.
The ICO guidance on SARs explains your rights in plain English if you need further detail.
How to Submit Your Claim Without a Solicitor or Claims Management Company
Going DIY is straightforward. CMCs typically charge 20–40% of any compensation they win for you. On a £2,000 refund, that’s up to £800 gone before you see a penny. The process is the same either way, you’re simply writing directly to the lender.
Writing Your Complaint Letter: What to Include
Your complaint letter should be clear and structured. Cover these points:
- Your full name, address, and account/agreement reference number
- The finance product (PCP, HP, or conditional sale) and the date you signed the agreement
- The name of the dealership that arranged the finance
- The allegation, state explicitly that you believe a discretionary commission arrangement was in place, that the dealer inflated your interest rate to earn commission, and that this was never disclosed to you
- The remedy you are seeking, a full refund of excess interest charged as a result of the DCA, plus statutory interest at 8% per annum
- A deadline for response, request a response within eight weeks (the FCA’s standard complaints-handling window)
Send the letter by recorded post and keep a copy. You can also email the lender’s official complaints address, but follow up with a physical copy if you don’t get an acknowledgement within five working days.
What Happens After You Send the Letter, Timelines and the FCA Pause
Normally, lenders must respond to a financial complaint within eight weeks. The FCA granted an extended complaints-handling pause to allow lenders time to implement a consistent redress scheme. That pause has run through into 2026 while the Supreme Court proceedings were resolved and the FCA finalised its approach.
In practical terms: your complaint is formally logged from the date you send it, your limitation rights are protected, and you will receive a response once the FCA’s framework is in place and the lender processes your case. This is not a reason to delay, submitting now locks in your position in the queue and protects your claim deadline.
For context on understanding refund calculations and pushing back on a low offer, the guide on how to calculate and negotiate a financial settlement is a useful reference.
How Much Could You Receive?
The size of your refund depends on three factors: how much you borrowed, how large the interest rate uplift was, and how long you held the agreement.
For a modest loan held over two or three years where the dealer raised the rate by one or two percentage points, the excess interest could run into a few hundred pounds. For a larger PCP agreement, say, a £20,000 or £25,000 car financed over four years, with a more significant rate uplift, the refund can reach several thousand pounds.
On top of the excess interest, upheld claims attract statutory interest at 8% per annum on the amount overpaid, running from the date of each payment. That adds up, particularly for agreements that are now five or more years old.
There is no single average figure that applies to everyone. Calculate it based on your own agreement. Your original finance document shows the APR you paid; the lender’s standard rate at the time (which they must disclose via your SAR) shows what you should have paid. The difference, compounded over the agreement term, is your starting claim figure.
Lender Rejected Your Car Finance Claim? Your Next Steps
A rejection is not the end. Lenders frequently issue preliminary rejections, and a significant proportion of FOS decisions go in consumers’ favour on car finance complaints.
If your lender rejects your claim or issues a final response you disagree with, follow these steps:
- Read the rejection letter carefully, identify the specific reason given and note whether it is a final response or an interim update
- Gather any additional evidence that addresses their stated reason, for example, if they claim commission was disclosed, check your SAR documents to see whether any disclosure was clear and prominent
- Escalate to the Financial Ombudsman Service, you have six months from the date of a final response letter to refer your complaint to the FOS
Understanding what to do when a financial claim is denied can help you frame your escalation effectively before you approach the Ombudsman.
Taking Your Complaint to the Financial Ombudsman Service
The Financial Ombudsman Service (FOS) is free and independent. The FOS has confirmed it can investigate car finance commission complaints, and its decisions are binding on lenders, if the FOS upholds your complaint, the lender must pay.
To refer your complaint:
- Go to financial-ombudsman.org.uk and complete the online complaint form
- Attach your original complaint letter, the lender’s final response, and any supporting documents
- The FOS will contact both you and the lender and work toward a decision
The six-month referral window runs from the date on the lender’s final response letter. Don’t miss it. If the complaints pause means the lender hasn’t issued a final response yet, the clock hasn’t started, but keep records of every communication in case there is any dispute about timing.
On the broader question of appealing a rejected compensation claim, the escalation logic is the same: a rejection from the first decision-maker is not final, and a free independent route exists.
On deadlines: the FCA review and Supreme Court proceedings have influenced how limitation periods apply. Submitting your complaint now, before any final deadline the FCA announces, is the safest approach. Once the redress scheme deadline is set, late claims may be barred.
If you want a second opinion on your eligibility or help drafting your complaint letter, use our free eligibility checker below. There’s no upfront cost, and if we think you have a strong claim, we can guide you through the process, without taking a cut of your compensation if you choose to proceed yourself.