A flood of complaints about mis-sold car finance has shaken the UK financial sector, as thousands of drivers uncover hidden commissions that quietly inflated their repayments.
According to new data from the Financial Ombudsman Service (FOS), over 18,600 complaints were filed in just four months between September and December 2024, making car finance the most complained-about financial product in Britain — overtaking credit cards for the first time.
The sharp rise in PCP claims is a major driver of the surge. These personal contract purchase agreements — a popular way to finance cars — have come under scrutiny after it emerged that many were sold with secret commission arrangements that left drivers unknowingly paying inflated interest rates.
The Hidden Commissions Fueling the Scandal
The root of the controversy lies in a long-running practice called discretionary commission arrangements. Under this system, dealers were allowed to set the interest rate customers paid on their finance deals.
The incentive was clear: the higher the interest rate, the bigger the commission the dealer pocketed from the lender. However, in most cases, customers were kept completely in the dark about these arrangements.
Many drivers believed the interest rate they received was based purely on their credit score or the lender’s standard pricing. In reality, many were unknowingly paying a dealer-inflated rate designed to fatten commissions — with the customer left to foot the bill.
The Financial Conduct Authority (FCA) outlawed the practice from January 2021, but millions of deals signed between 2007 and 2021 were still affected — and that’s why complaints continue to roll in.
What Sparked the Explosion in Complaints?
Although the practice was banned years ago, many drivers were unaware of the hidden commissions in their deals until very recently. The turning point came in October 2024, when the Court of Appeal ruled that undisclosed commissions could make finance agreements unfair and even unenforceable.
That ruling triggered an immediate rush of complaints, as thousands of drivers — many of whom financed their cars through Black Horse Finance, one of the largest lenders in the market — realised they might be entitled to refunds.
This explains why Black Horse finance claims are now a significant chunk of the cases currently being assessed by the Ombudsman.
How Much Could You Claim?
If you were sold a car finance deal where a commission was hidden from you, you could be entitled to a refund worth thousands of pounds.
The amount depends on:
- Whether your finance agreement mentioned the dealer’s commission. If it didn’t, the contract could be ruled unfair.
- Whether your interest rate was inflated specifically to boost the dealer’s commission.
- Whether proper affordability checks were carried out before your deal was approved.
Each case is reviewed individually by the Financial Ombudsman Service, which examines the contract itself, the commission details, and how much financial harm the customer suffered.
How This Became a Multi-Billion Pound Problem for Banks
For banks and lenders, this isn’t just a wave of complaints — it’s a financial storm that could cost them up to £44 billion in compensation.
Major lenders are already preparing:
- Lloyds Banking Group, which owns Black Horse Finance, has more than tripled its compensation fund to £1.2 billion.
- Close Brothers Bank, another big name in PCP finance, has set aside £165 million to handle refunds and related investigations.
This isn’t just about money — it’s about trust. For years, customers believed they were being offered fair finance deals. Now, they are learning that some dealers manipulated rates purely to line their own pockets.
Do You Have a PCP Claim? Here’s How to Check
If you took out PCP finance or any car finance between 2007 and 2021, it’s well worth checking whether you were affected.
Start by:
- Finding your finance agreement and checking whether dealer commissions were ever mentioned.
- Reviewing your paperwork, including emails, letters, and payment schedules from the lender and dealer.
- Submitting a formal complaint to your lender, explaining why you believe your deal was mis-sold — and including copies of all relevant documents.
- Escalating to the Ombudsman if your lender refuses to resolve your complaint. The FOS offers a free and impartial review if your lender won’t engage.
- Considering legal support if you are pursuing a complex case or if your potential refund is substantial. Specialist solicitors can offer valuable advice.
Regulators and the Government Are Paying Attention
With the scale of compensation claims growing daily, the UK Treasury has applied to intervene in a key Supreme Court case, warning that the final compensation bill could even threaten the stability of some lenders.
Meanwhile, the Financial Ombudsman Service is preparing for a wave of claims by updating its fee structure from April 2025, partly to manage the flood of complaints — particularly those filed by claims management companies on behalf of drivers.
The changes aim to prioritise genuine cases, ensuring drivers with valid claims get the refunds they deserve, while discouraging speculative or opportunistic claims that could clog up the system.
What This Means for the Car Finance Industry
This isn’t just a financial crisis — it’s a reputation meltdown for the car finance sector.
For years, drivers trusted dealerships to offer finance packages that were clear and above board. Instead, it’s now clear that hidden charges were quietly added into many deals, enriching dealers and lenders while leaving customers to pay the price.
The surge in car finance claims shows that drivers aren’t willing to let this go — and with the law now on their side, the car finance industry faces intense pressure to clean up its act for good.
Don’t Wait — Check Your Finance Deal Now
If you financed a car between 2007 and 2021, particularly with a PCP agreement, now is the time to review your contract and ask questions.
Thousands of drivers have already started the process, and with the Court of Appeal ruling in place, your chance of successfully reclaiming compensation has never been better.
Don’t wait for your lender to contact you. Check your paperwork, raise your complaint, and find out if you could be owed thousands.
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