Lender discloses under a quarter of GAP premium actually paid for the cover

Important update: The FCA redress scheme is partially suspended

This article was written before recent developments around the FCA’s redress scheme. If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

A motor finance lender has revealed that more than three-quarters of the price one customer paid for Guaranteed Asset Protection insurance, more commonly known as GAP insurance, was retained as commission and remuneration, with only 23.2% of the premium in question actually representing the cost of the insurance itself. According to Financial Conduct Authority (FCA)-regulated claims management company Your Money Claim, which handled the complaint, the figure was only disclosed after it had reported Advantage Finance’s conduct to the regulator.

This latest disclosure adds further weight to concerns that GAP insurance and other add-on products may have included hidden commissions at a scale similar to that seen in motor finance agreements.

How the commission came to light

Your Money Claim was acting for a consumer who had complained about a GAP insurance policy they had taken out alongside their car finance. The figures involved relate to that single policy rather than being a market-wide finding.

The firm has previously raised issues relating to GAP insurance and submitted evidence of discretionary commissions within this product to the FCA in late 2025.

Why does the level of commission matter?

Consumers who buy GAP insurance are entitled to believe that their premium covers the cost of their protection. When that premium is mostly commission, a consumer cannot properly assess the value of the product.

This is the same underlying problem that sits at the heart of misconduct in the motor finance market. Where a discretionary commission arrangement (DCA) was in place, a broker could increase the interest rate on a consumer’s motor finance agreement, which, in turn, would allow the broker to earn more commission and result in the consumer ultimately paying more than they should have. With GAP insurance, in instances such as those uncovered by Your Money Claim, undisclosed commissions increased the price of the policy. In both situations, the consumer paid more than they should have but did not know this was the case.

The regulator has already examined the GAP insurance market:

• In September 2023, the FCA published its General insurance value measures data 2022, in which it highlighted concerns about GAP insurance and questioned whether it was providing fair value to consumers after finding that some firms were paying out up to 70% of the value of insurance premiums in commission.
• In February 2024, the FCA took action that saw firms accounting for 80% of the GAP insurance market temporarily pause sales of the product, with several permitted to resume in May 2024.
• In its General insurance value measures data 2024, published on 17 October 2025, the regulator highlighted the impact of its work in this space.

The lender’s limitation argument

Your Money Claim says that, after disclosing the figure, Advantage Finance then sought to rely on limitation, arguing that too much time had passed for the claim to be considered. Advantage Finance took this position despite the Supreme Court’s judgment in Canada Square Operations Ltd v Potter providing a clear precedent and the presence of a supporting Financial Ombudsman Service decision.

The Potter case is directly relevant. In that case, a lender had not told its customer that it retained 95% of a PPI premium as commission. The Supreme Court held in 2023 that the consumer’s claim was not time-barred, because the commission had been deliberately concealed.

Where commission was concealed, the age of an agreement alone may not automatically mean that a claim is time-barred, but the eligibility of any particular claim and whether it is subject to limitation will always depend on the facts of that claim.

Could you have a GAP insurance mis-selling claim?

Not every GAP insurance policy purchased as part of a broader motor finance transaction was mis-sold. However, where commission was high and undisclosed or where the product was unsuitable and not needed owing to the value of the vehicle or the structure of your finance agreement, there may be valid grounds for complaint.

The FCA's motor finance redress scheme is deliberately narrow in scope. It only deals with hidden commissions on motor finance agreements themselves, not issues with GAP insurance or elsewhere across the broader transaction. Any such complaint would need to be pursued separately. Identifying such issues is one of the potential benefits of instructing a solicitor to bring your motor finance claim. Instructing a solicitor does not guarantee you will receive additional compensation. However, it does mean that the whole of the sale is examined, including GAP insurance and other add-on products, rather than the finance agreement alone.

Register your motor finance claim with Harcus Parker

Harcus Parker can help you:

• identify your motor finance agreements dating back to 6 April 2007;
• investigate whether any add-on products you purchased were mis-sold;
• request disclosure of commissions paid on those products; and
• pursue separate claims in respect of those products, if applicable, on your behalf.

Register your claim with Harcus Parker here.