PCP and HP Mis-Selling: What Counts as Mis-Sold Car Finance in the UK

The FCA’s Motor Finance Consumer Redress Scheme (PS26/3), confirmed on 30 March 2026, is the largest consumer compensation programme in UK motoring history. It covers an estimated 12.1 million agreements and is expected to return around £7.5 billion to consumers who were overcharged on car finance between 6 April 2007 and 1 November 2024.

But not every agreement was mis-sold. The scheme does not cover all car finance — it targets three specific types of unfair commission arrangements that meant consumers paid more than they should have. If your finance deal was arranged fairly and the commission was properly disclosed, it may not qualify for redress.

This article explains each type of mis-selling in plain English so you can understand whether your PCP or HP agreement might qualify. We cover discretionary commission arrangements, high commission deals, and exclusivity ties — along with what does not count as mis-selling and how to check your own agreement.

Before You Start

1. Find your finance agreement paperwork. You need the lender’s name, the agreement number, the dates the agreement ran, and the type of finance (PCP, HP, or conditional sale). If you’ve lost the paperwork, check your email for “finance agreement” or “credit agreement” — many lenders sent digital copies. You can also contact the lender directly to request a copy.

2. Understand what “mis-sold” means in this context. Mis-sold does not mean the car was faulty, overpriced, or unreliable. It means the finance arrangement itself was unfair — specifically, that the commission structure meant you paid a higher interest rate than you should have. The car could have been perfectly fine and the finance still mis-sold.

3. You do not need to prove mis-selling yourself. Under the FCA’s redress scheme, the lender is required to assess whether your agreement involved an unfair commission arrangement. You submit a complaint, and they must investigate. You do not need to gather evidence or prove what the dealer did.

1. What Is a Discretionary Commission Arrangement (DCA)?

A discretionary commission arrangement was a deal between a car dealer and a finance lender that gave the dealer the power to adjust the interest rate on your finance agreement. The critical part: the higher the rate the dealer set, the more commission they earned. This created a direct financial incentive for the dealer to charge you more.

Here is how it worked in practice. The lender would offer the dealer a base rate — say 5% APR. The dealer could then “mark up” that rate to whatever they chose, often 8%, 9.9%, or higher. The difference between the base rate and what you actually paid went to the dealer as commission. You were never told the base rate existed.

Example: A dealer is offered a 5% base rate by the lender. They set your PCP agreement at 9.9% APR. On a £15,000 loan over 4 years, that rate increase adds roughly £1,500 in extra interest — all of which flows to the dealer as commission. You had no idea the base rate was 5%.

DCAs were banned by the FCA on 28 January 2021. This is the most common type of unfair arrangement and applies to the majority of agreements the scheme covers.

2. What Is a High Commission Arrangement?

A high commission arrangement is less common than a DCA but typically involves larger payouts to the dealer. Under the FCA’s scheme, a commission qualifies as “high” if it meets both of the following thresholds:

• The commission was at least 39% of the total cost of credit (the total interest you paid over the life of the agreement)
• AND the commission was at least 10% of the total loan amount

Both conditions must be met for the arrangement to qualify. If the commission was 39% of the cost of credit but only 8% of the loan amount, it would not meet the threshold.

These arrangements were less common because they required very high commission levels, but when they did occur, the financial impact on the consumer was usually significant.

3. What Are Exclusivity and Contractual Tie Arrangements?

An exclusivity arrangement (also called a contractual tie) is where a lender had exclusive rights or first refusal on a dealer’s finance business. This meant the dealer was contractually obligated to offer that lender’s finance products first, or exclusively, reducing your access to competitive rates from other lenders.

The concern is that these arrangements limited competition. If the dealer could only offer finance from one lender, you were not getting the benefit of the dealer shopping around for the best rate on your behalf.

Exception: Where there were visible links between the manufacturer and the dealer, exclusivity arrangements may not qualify. For example, a BMW dealer using BMW Financial Services openly is not considered unfair because the manufacturer-dealer relationship is transparent to the consumer.

4. The Commission Thresholds

Not every commission arrangement qualifies for redress. The FCA set minimum thresholds below which the commission is considered too small to have meaningfully influenced the dealer’s behaviour:

If the total commission paid on your agreement was below these amounts, your agreement is excluded from the scheme. The FCA considers that at these levels, the commission would not have been large enough to create a meaningful incentive for the dealer to act against your interests.

5. What Does NOT Count as Mis-Selling

Understanding what is excluded is just as important as knowing what qualifies. The following do not fall under the FCA’s redress scheme:

• Personal bank loans — If you took out a personal loan from a bank or building society to buy a car, this is not covered. The scheme only applies to finance arranged through a dealer.
• Operating leases and personal contract hire (PCH) — Lease agreements where you never had the option to own the vehicle are not included.
• Agreements outside the date range — Only agreements entered into between 6 April 2007 and 1 November 2024 are covered.
• Agreements where commission was properly disclosed and consented to — If the dealer clearly told you how much commission they were earning and you gave informed consent, the arrangement may not be considered unfair.
• 0% finance deals with no commission — Where no interest is charged, there is typically no commission arrangement to assess.
• Commission below the threshold — Agreements where commission was £120 or less (pre-April 2014) or £150 or less (post-April 2014).

6. How to Check Your Own Agreement

1. Look at your paperwork for the APR. If you were charged a rate significantly above the market average at the time (often 3–6% for good credit), there may have been a markup.
2. Check whether commission was disclosed. Look for any mention of commission, broker fees, or intermediary payments in your agreement. Most agreements from this period did not disclose commission at all.
3. Use the FCA lender list. Visit fca.org.uk/consumers/car-finance-complaints/list-lenders to find your lender and their complaint process.
4. Submit a complaint and let the lender assess it. You do not need to determine whether your agreement was mis-sold. The lender holds the records and must assess whether an unfair commission arrangement was involved.

7. The Two Schemes Explained

The FCA’s redress programme is split into two schemes based on when your agreement was taken out. The calculation method differs, but the complaint process is the same for both.

Scheme 2 agreements are generally expected to produce larger payouts because the market rate comparison method captures more of the overcharge. Scheme 1’s fixed 21% adjustment is simpler but may result in smaller redress amounts.

8. What Happens If Your Agreement Was Fair

If the lender assesses your agreement and finds that no unfair commission arrangement was involved, they will write to you explaining their decision. This is called a “final response.” The letter will set out why they believe the agreement was fair.

If you disagree with the lender’s decision, you have two options:

• Escalate to the Financial Ombudsman Service (FOS) — This is free and must be done within 6 months of receiving the lender’s final response. The FOS will independently review your case.
• Pursue a court claim — You retain the right to take legal action regardless of the FOS outcome. However, this involves costs and should be discussed with a solicitor first.

Being told your agreement was fair is not the end of the road. The FOS overturns a significant proportion of lender decisions, so it is worth escalating if you believe the assessment was wrong.

Worked Example: Two Agreements Compared

Here are two agreements side by side — one that qualifies for redress and one that does not.

These are simplified illustrations. Every agreement is assessed individually by the lender under FCA rules. The only way to know for certain is to submit a complaint.

Final Thoughts

Understanding what counts as mis-sold car finance is the first step toward knowing whether you are owed money. The three types — discretionary commission arrangements, high commission deals, and exclusivity ties — cover the specific ways that commission structures worked against consumers. If your agreement involved any of these, the lender must pay you redress.

The process is free. You do not need to prove anything. You do not need a claims company. Simply submit a complaint to your lender using the FCA’s template letter or MoneySavingExpert’s free tool, and the lender must assess your agreement within the FCA’s deadlines.

If your agreement turns out to be fair, you lose nothing. If it was unfair, you get money back. There is no downside to checking.

For specific legal advice about your individual situation, consult Citizens Advice or a qualified solicitor.

Related reading: Car Finance Claim Deadline Guide | Car Finance Claim Payout Calculator