Understanding the PCP Scandal in the UK

The PCP (Personal Contract Purchase) scandal has emerged as a significant issue within the UK car finance market. It revolves around the undisclosed commissions and mis-sold financing arrangements, exposing unethical practices that have impacted millions of consumers. If you've financed a car before January 2021, especially through PCP or Hire Purchase agreements, this issue might directly affect you.

The Root of the Problem: Discretionary Commission Arrangements

Between 2007 and 2021, discretionary commission arrangements (DCAs) allowed brokers (usually car dealers) to set or adjust interest rates on finance agreements. The brokers often inflated rates to maximize their commissions, which were tied to how much extra interest consumers paid. Worst of all, these commissions were not disclosed to the buyers, preventing them from making informed financial decisions.

The FCA (Financial Conduct Authority) banned DCAs in January 2021, citing that they incentivized unfair practices. Yet, countless consumers were overcharged for car loans, unknowingly paying higher interest than necessary.

Legal Developments and Court Rulings

The PCP scandal gained further traction after significant rulings by UK courts. In October 2024, the Court of Appeal ruled that car dealers acted unlawfully if they didn't disclose their commissions and failed to obtain the customer's informed consent. This decision established that borrowers should know about all commission-based incentives tied to their finance agreements before signing a deal.

In April 2025, the UK Supreme Court reviewed this case, further expanding the legal duties of transparency and fiduciary responsibility on car dealers. If the Supreme Court upholds earlier decisions, firms could face billions in payouts and need to overhaul their business practices. The impact is expected to reshape the motor finance landscape significantly.

How Does This Affect You?

If you purchased a vehicle before January 2021 under a PCP or Hire Purchase agreement, you might have been overcharged because of undisclosed commissions. Key indicators that you could be affected include:

• Your lender or dealer failed to inform you about their commission earnings.
• You suspect you paid higher interest rates because of dealer adjustments.
• The deal's terms or fees were unclear during the purchase.

This mis-selling scandal could entitle you to claim compensation for any losses incurred due to inflated interest rates or breach of fiduciary duty.

FCA's Role and Redress Scheme

The Financial Conduct Authority (FCA) is leading efforts to investigate and resolve this issue. Since 2021, the FCA has reviewed millions of cases involving DCAs, aiming to ensure fair outcomes for consumers. The regulator recently hinted at launching a redress scheme that would make it easier for affected consumers to receive compensation without individually filing claims.

How to Claim Compensation

1. Use our free checker to see if you qualify.
2. Submit a few basic details.
3. Let the legal team handle the rest.

Key Takeaways

• The PCP scandal centers on undisclosed commissions that inflated consumer costs on car finance deals.
• It applies mainly to agreements made before January 2021 under discretionary commission arrangements.
• Consumers may claim compensation for losses stemming from higher interest rates or misrepresentation.

With billions potentially set aside for redress schemes, it's essential for affected consumers to act promptly and safeguard their financial interests.