What is the car finance commission scandal?
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In short: It refers to hidden commissions on car finance. Before January 2021, dealers could raise a customer's interest rate to earn more commission without telling them. A 2025 Supreme Court ruling and an FCA review have opened the door to compensation for affected drivers.
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Reviewed by Kaiser Khan
Most car finance (PCP and HP) is arranged by the dealer acting as a credit broker. Under discretionary commission arrangements, the lender let the dealer choose the interest rate, and the dealer earned a bigger commission on higher rates — a clear conflict of interest that was usually not disclosed. The FCA banned DCAs in January 2021.
The issue escalated when courts examined whether customers were told enough about commission. A Supreme Court judgment in 2025 clarified the legal position on disclosure, after which the FCA confirmed plans for a structured redress scheme covering eligible historic agreements.
For drivers, the practical takeaways are: agreements before 28 January 2021 are most likely in scope; you can complain to your lender for free; and you should rely on the FCA's official scheme rather than paying a claims firm. The position is still developing, so check gov.uk/complain-financial-service.
Primary source: gov.uk/complain-financial-service
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