PCPs and HPs

Written by Cat McGarrell, litigation associate at Gilson Gray

Between 2017 and 2019 the UK witnessed one of the biggest advertising campaigns related to mis-sold financial productions. Now, the profession prepares for what could be another major compensation scheme for mis-selling practices in relation to PCPs and HPs.

Between 2017 and 2019, it was almost impossible to miss an animatronic Arnold Schwarzenegger urging you to submit a complaint about payment protection insurance (PPI), in one of the UK’s biggest advertising campaigns related to mis-sold financial products. More than five years on from the deadline for PPI claims, Arnie could ‘be back’ as we prepare for another potential major compensation scheme for mis-selling practices. 

The Financial Conduct Authority (FCA) is currently investigating the potential mis-selling of car finance products – specifically personal contract purchases (PCPs) or hire purchases (HPs). If you financed your car through either of these types of agreements before 28th January 2021, you could be entitled to compensation.

The issue initially stemmed from what were known as discretionary commission agreements (DCAs).

Prior to January 2021, some car finance brokers, including car dealers and third-party agents, had the power to raise the interest rates on finance deals. This practice allowed brokers to inflate rates, increase their own commissions and financially benefit the finance company, often leaving car buyers paying more than necessary without their knowledge. In response, the FCA stepped in and imposed a ban on DCAs in January 2021.

Further investigation

However, in December 2024, following a Court of Appeal ruling in October 2024, the FCA announced an extension of its investigation – now potentially affecting all hidden commission arrangements, not just those involving DCAs. The court’s decision highlighted that consumers are entitled to know all material facts, including the amount of commission, a detail that was often not disclosed even in fixed commission agreements.

As a result, many more consumers could potentially have been mis-sold car finance deals, expanding the pool of affected individuals beyond the initial estimated 40% of claims. Broadening the scope of the investigation could double the number of people eligible for compensation from previous estimates of around 10 million.

The FCA has also allowed additional time for finance firms to handle motor finance commission complaints, extending the deadline to December 2025 to account for potential Supreme Court decisions.

Given the FCA’s communications to date and the substantial evidence base it seems to have, a large-scale compensation scheme seems more likely than. Campaigners have highlighted the potential magnitude of this investigation, suggesting it could rival the scale of the PPI scandal. According to projections, the average compensation per affected consumer could be around £1,100.

For consumers affected by DCAs, not much has changed; the FCA is still expected to announce in May 2025 whether or not a compensation framework for this type of hidden commission will be set. For motorists affected by other types of hidden commission arrangements, we’re still yet to find out when and if such a compensation scheme will extend to them.

Steps to take now

Although the FCA has pushed back sharing the findings of its investigation and proposing next steps, there are steps you can take now if you think you were mis-sold a PCP or HP agreement.

Firstly, collect all relevant documents, including your original contract, reference numbers and any correspondence related to your finance agreement. That way, you will have all the information you need readily available.

Secondly, while the FCA has temporarily paused responses to complaints as it reviews the issue, it is still a good idea to look at your options now. This ensures that your case is in the queue and ready for processing once the investigation concludes.

Finally, consider consulting a legal adviser specialising in financial mis-selling. They can help you determine if you were affected and what you are entitled to complain. A lawyer can also assist in obtaining additional records and evidence, if needed.

The FCA widening its investigation represents a significant step in addressing the mis-selling of car finance products. Findings are expected to be shared in May 2025 (for DCAs at least, and potentially other types), which will clarify whether the current complaint process will resume, be modified, or if a new approach needs to be introduced. Getting prepared now will put you in the strongest possible position to receive any potential compensation when ‘judgement day’ arrives.

Written by Cat McGarrell, litigation associate at Gilson Gray