Over the past two decades, the Payment Protection Insurance (PPI) scandal led to more than £38 billion in compensation payouts, reshaping the UK’s financial services landscape. Today, similar concerns are surfacing in the car finance sector—prompting widespread investigations and potential claims. Mis-selling in this area, particularly involving hidden commissions and inflated interest rates, is now emerging as the next multi-billion-pound issue for lenders and consumers alike.
A New Era of Financial Mis-Selling Claims
While PPI claims highlighted issues around unnecessary insurance policies sold without informed consent, car finance mis-selling focuses on undisclosed commissions and unfair lending practices that left many drivers paying far more than they should have. Many car buyers were unaware that brokers and dealerships were increasing interest rates to boost their own commission—an arrangement that the Financial Conduct Authority (FCA) now scrutinises closely.
What Do PPI and Car Finance Claims Have in Common?
- Hidden Costs
Much like with PPI, customers in the car finance sector are discovering hidden charges embedded in their agreements. These undisclosed fees, often related to inflated interest rates or commissions, have led many to exceed their planned budgets without realising why. - Undisclosed Commissions
In both PPI and car finance claims, one key issue remains the same: financial institutions and brokers failing to disclose the commission they receive. In the car finance industry, this resulted in consumers unknowingly paying higher interest rates, while lenders and brokers benefitted financially. - Unfair Lending Practices
Customers have often been placed in financial agreements they didn’t fully understand—agreements that prioritised profit over fairness. Whether through unnecessary insurance add-ons or inflated borrowing costs, consumers were not given the transparency required to make informed decisions.
What Sets Car Finance Claims Apart?
Complexity of Agreements
Unlike PPI policies, which were relatively simple to identify and contest, car finance agreements are more layered. With products like Personal Contract Purchase (PCP), Hire Purchase (HP), and leasing options, many consumers struggle to spot unfair terms or inflated charges. Leading lenders, such as Black Horse, have come under scrutiny for these complex structures, some of which have led to legal disputes over mis-selling.
Discretionary Commission Models
A central issue in car finance mis-selling involves the use of discretionary commission arrangements. Under this model, brokers were incentivised to charge higher interest rates in order to increase their own earnings—placing the customer at a significant disadvantage. This contrasts with PPI mis-selling, which usually involved simply bundling in unnecessary insurance.
How Big Could This Be?
With millions of car finance agreements potentially affected, estimates suggest that compensation payouts may rival or even exceed those seen during the PPI scandal. As a result, major lenders are already putting aside substantial reserves to prepare for claims. The FCA has launched multiple investigations and could soon initiate formal redress schemes if systemic misconduct is confirmed.
Why Car Finance Claims Are Gaining Momentum
- Increased Consumer Awareness
Following the success of PPI claims, UK consumers are now more informed and empowered to challenge financial mis-selling. This has led many to review past car finance agreements and seek expert legal support. - Media Coverage and Public Concern
High-profile reports in national media outlets have exposed the hidden costs embedded in car finance deals, triggering widespread concern and encouraging more people to come forward. - Legal and Claims Specialists Are Taking Action
A growing number of law firms and claims management companies are actively pursuing compensation on behalf of affected consumers—often on a no-win, no-fee basis. At Baker Hardman Solicitors, we are at the forefront of this effort, ensuring our clients receive the compensation they deserve.
What Does This Mean for the Future?
Tighter Lending Regulations
Lenders are expected to adopt more transparent and responsible lending practices. This includes clearer affordability checks and the full disclosure of commission structures.
Greater Clarity in Financial Agreements
Future finance contracts will likely require greater transparency around fees, interest rates, and broker commissions to prevent further mis-selling.
Potential FCA Deadline
Similar to PPI claims, the FCA may impose a claims deadline to streamline the process and encourage consumers to act promptly.
What Should You Do Now?
If you took out a car finance agreement in the past 10 years—particularly one involving PCP or HP—it’s worth reviewing the terms to see if you may have been overcharged due to hidden commissions or inflated interest rates.
At Baker Hardman Solicitors, our specialist legal team can help you assess whether you’re eligible to make a claim. Acting now can help you avoid potential cut-off dates and secure the compensation you may be entitled to.
Contact us today to discuss your case and begin your claim with confidence.
What Is Car Finance Mis-Selling?
Car finance mis-selling happens when lenders or car dealerships put profits before fairness and transparency. It’s not just about complicated contracts—it’s about deliberately withholding crucial information that would have affected your decision.
Common Mis-Selling Issues We See:
- Hidden Commissions: Many dealers earned commission from lenders—without ever telling the customer. This practice was declared unlawful following a major Court of Appeal case.
- Discretionary Commission Arrangements (DCAs): Dealers increased the interest rate offered to the customer to maximise their own earnings.
- Lack of Affordability Checks: Some customers were sold finance deals without any proper review of whether they could actually afford them.
Which Agreements Are More At Risk?
Personal Contract Purchase (PCP)
PCP agreements offer lower monthly payments, but they come with layers of complexity that are easy to miss. These may include:
- Hidden fees at the end of the term.
- Inflated interest rates not clearly explained.
- Undisclosed dealer commissions.
Hire Purchase (HP)
While typically more straightforward, HP agreements aren’t immune to mis-selling either. Customers may still face:
- Hidden lender commissions.
- Higher interest rates than expected.
No matter which type of agreement you have, you could be affected.
Why It Pays to Investigate
The Financial Conduct Authority (FCA) estimates that some drivers overpaid by an average of £1,100 per vehicle due to DCAs and hidden commissions.
By reviewing your finance agreement, you could claim back:
- Undisclosed Commissions
- Excess Interest Charges
- Compensatory Interest – typically an extra 8% per year on the money you overpaid
A £10,000 vehicle finance deal, for instance, could lead to a refund exceeding £1,000.
Signs You May Have Been Mis-Sold
Ask yourself:
- Were you ever told the dealer was receiving a commission?
- Was your interest rate unusually high (e.g. over 3.9% APR)?
- Were the terms of your agreement unclear or rushed?
- Did the dealer ask about your financial situation at all?
If you’ve answered yes to any of these, there’s a strong chance your agreement may have been mis-sold.
How Baker Hardman Solicitors Can Help
We are currently helping drivers across the UK reclaim money they’re owed from mis-sold car finance agreements. Our expert legal team will handle the process from start to finish, and you won’t pay a penny unless we win your case.
Our Simple 3-Step Process:
- Initial Consultation: Share the basic details of your finance agreement—no need to track down paperwork at this stage.
- Case Review: We’ll assess whether your agreement shows signs of mis-selling.
- Claim Submission: If eligible, we’ll pursue the refund on your behalf, including statutory interest.
What You Could Claim Back
A successful claim may entitle you to:
- Refund of Hidden Commissions
- Reimbursement for Excess Interest
- Compensatory Interest at 8% per annum
If you’ve financed more than one vehicle, each agreement could result in a separate claim—multiplying your potential refund.
Take Action Today – It’s Risk-Free
Don’t let unfair finance deals drain your wallet. Many drivers are sitting on claims worth thousands, unaware of what they’re owed.
At Baker Hardman Solicitors, we offer a no-win, no-fee service to give you peace of mind. Let us investigate your finance agreement and help you recover your money—no hassle, no risk.
👉 Get in touch today to find out if your car finance agreement was mis-sold. It could be one of the most valuable steps you take this year.
