How will I know if my car finance was mis-sold?

Most people judge a car finance deal by whether the monthly payment felt affordable when they entered into it. 

The Financial Conduct Authority’s (FCA) work in the motor finance space, culminating in its redress scheme proposals published on 7 October 2025, has examined what happened, or did not happen, at the point of sale, particularly around commission, conflicts of interest, and dealer-lender relationships.

If you entered into a car finance agreement between 6 April 2007 and 1 November 2024, and were not properly informed about commission, conflicts of interest, or dealer-lender ties, you may fall within the scope of the regulator’s proposed redress scheme. The FCA estimates that consumers will receive an average of £700 per in-scope agreement.

Can you remember what happened at the dealership?

You may be in scope and eligible to receive compensation via the regulator’s redress scheme if any of the following happened when buying and financing your vehicle:

• You were not told the lender would pay the dealer a commission, or the dealer told you in vague wording that did not explain the incentive properly.
• Your interest rate felt 'flexible' or negotiable, but it was not explained why.
• Your dealer did not tell you that they had access only to one lender or a limited panel, or that it was tied to a particular lender or incentivised to get you to take finance with a specific lender.
• The dealer presented the monthly payment as the only or primary material factor, with little clarity on the total cost of credit, how the interest rate was set, or whether cheaper options were available.
• You left with paperwork, but it did not clearly disclose commissions or conflicts of interest in a way you could reasonably have been expected to see, discover, or understand.

None of these points proves mis-selling on its own. However, they are practical indicators of the disclosure gaps that the FCA's proposed redress scheme is designed to address. 

What ‘mis-sold’ means in the context of the FCA’s redress proposals

The FCA’s redress proposals focus on: 

• commission structures and conflicts of interest within the sale of motor finance products and whether these were adequately disclosed; and
• whether contractual ties between dealers and lenders distorted the transaction in ways that the customer could not see or reasonably have become aware of.

The specific issues that are in scope are:

• Discretionary commission arrangements (DCAs), which allowed car dealers to influence the interest rate paid and thereby increase their commissions. The FCA banned DCAs on 28 January 2021.
• High commission arrangements, which the regulator sets out in its redress scheme consultation paper, CP25/27: Motor Finance Consumer Redress Scheme, as commission ‘equal to or greater than 35% of the total cost of credit and 10% of the loan’.
• Tied arrangements, where an exclusive or near-exclusive relationship between a dealer and lender may have created a conflict that your dealer should have properly explained to you.

What should have happened at the dealership (and what often went wrong)

If the sales process had been fair, any incentives the car dealer had to offer you a specific interest rate or place you with a specific lender would have been visible. If dealers did not disclose those incentives, you could not judge properly whether a dealer was recommending or providing you with a product because it was the best one to suit your circumstances, or because it was the one that would pay them the most commission.

1. All incentives and conflicts should have been clear

In a fair process, you would understand clearly that:

• the dealer is acting as a broker in arranging your car finance;
• the lender may pay the dealer; and
• the structure of the agreement may create incentives that influence what you are offered.

The alleged misconduct in motor finance arose when disclosure was either absent, buried in small print, or too vague to be meaningful, particularly when a commission payment could change depending on the terms and interest rate in the agreement.

2. The rate-setting process should have been clear, not implied

A common red flag that could indicate that mis-selling occurred is that your dealer told you that your rate was 'what the system is giving you,' when the commercial reality may have been that your rate could move and that the dealer's earnings could move with it. The regulator's investigations and redress proposals relating to car finance agreements with undisclosed DCAs sit in that space.

3. Tied relationships should not have been invisible

If your dealership was effectively tied to one specific lender, or operated under arrangements that steered consumers to a particular lender, it was not a fair process if your dealer led you to assume, or told you, that you had a range of options across a genuinely competitive market when you did not.

4. Conversations should not have centred on the monthly payment

Conversations about motor finance at the dealership often start and end with ‘how much can you afford per month?' While this does not automatically signify mis-selling, if the focus on the monthly payment occurred alongside non-disclosure of commission or conflicts of interest, it becomes part of the overall misconduct that the FCA’s redress proposals are aiming to remedy at scale.

Can I determine whether I was mis-sold?

In general, financial mis-selling can be challenging to identify and difficult to prove. In a motor finance context, your monthly payment does not, on its own, show whether mis-selling occurred, and mis-selling can be difficult to identify without documents and lender disclosure. However, there are some things that you may be able to consider that could indicate whether your car finance agreements were mis-sold and whether you may be eligible for compensation.

Review your documents

If you still have them, review:

• your credit agreement;
• any pre-contract information supplied by your broker or lender;
• your car finance quotation; and
• any dealer ‘addendum’ pages. 

You are specifically looking for wording that addresses:

• whether the dealer receives commission from the lender;
• the mechanism by which any commission was determined;
• whether commission varies depending on the interest rate or finance terms; and
• whether the dealer selected an agreement from a panel of lenders or was restricted or tied to a particular lender.

Discover how to find your old car finance agreements.

Do not worry about what you may or may not remember

In many cases, disclosure was entirely non-existent or provided in a vague manner that is unlikely to have registered at the time of the sale. That is why the document trail, what your dealer provided to you in writing, and how they provided it matter. The FCA's redress scheme will be designed to operate at scale, and decisions will be evidence-driven. Your documents may be even more vital if you choose not to participate in the redress scheme because you believe you may be able to achieve a more significant compensation award via litigation.

Treat any finance add-ons as a separate line item

The regulator's proposed redress scheme will handle complaints arising from undisclosed commissions or contractual ties in your motor finance agreement. However, there may also have been disclosure issues regarding commissions on common add-on products, such as GAP insurance and cosmetic cover. 

While these additional products will not be covered in the FCA redress scheme, instructing a solicitor to manage your car finance complaint means they can investigate whether you have grounds to bring these additional claims. A solicitor can also advise on the implications of accepting any redress offer, including whether it may affect separate complaints about add-ons, and investigate whether you experienced consequential loss due to motor finance mis-selling.

What you can do now

The FCA’s proposed redress scheme is designed to enable you to complain directly to your lender without using a solicitor and at no cost. In a recent update regarding its redress proposals, the regulator reiterated its recommendation that consumers who have not yet complained should do so now, as consumers with an existing complaint are likely to receive their compensation more quickly than those who have not complained and are waiting for their lender to contact them.

If you wish to complain yourself, you should submit a complaint to your lenders so they can check whether your agreement falls within scope of the redress scheme once it begins.

Or we can help you

Due to the lender-led nature of the proposed redress scheme, you may still want help with your complaint, particularly if your motor finance agreement ended more than six years ago and there is an increased risk that your lender no longer holds your records.

To ensure that all of your historical motor finance agreements from 6 April 2007 are uncovered, and to help you discover whether there were additional mis-selling issues within the wider transaction, which could lead to you receiving additional compensation, you can register your claim with Harcus Parker here.