Mis-sold car finance and commission disclosure: what you need to know
Millions of car finance agreements taken out before January 2021 may have involved a type of commission arrangement that the FCA has since ruled was unfair to customers. If you took out car finance through a dealer or broker before that date, you may be entitled to a refund of the excess interest you were charged. This guide explains what these arrangements were, how to check if yours was affected, and what to do if you want to make a claim.
When you take out car finance through a dealer or broker rather than directly with a lender, the dealer or broker typically receives a commission payment from the lender once the agreement is signed. This payment is for arranging the finance, and it is standard practice across the industry.
Commission disclosure means the dealer or broker must tell you that they are receiving this payment and explain how it works. FCA rules require this transparency so that you can judge whether the product being recommended to you is genuinely in your best interest, or whether the recommendation has been influenced by how much commission the arranger stands to earn.
Before January 2021, some car finance lenders allowed the dealers and brokers who arranged finance on their behalf to set or adjust the interest rate offered to the customer, within a range set by the lender. Under these arrangements, known as discretionary commission arrangements (DCAs), a dealer or broker who offered you a higher rate would earn a higher commission.
The FCA investigated these arrangements and found they created an inherent conflict of interest: the person arranging your finance had a direct financial incentive to offer you a higher rate than necessary. The FCA banned DCAs in January 2021 on the grounds that they were unfair to customers and led to many people paying more interest than they should have.
In January 2024, the FCA announced a wider review into whether customers who had finance agreements involving DCAs were owed redress. The FCA and the Financial Ombudsman Service (FOS) are both involved in determining what compensation may be due and how it will be paid.
Not every car finance agreement taken out before January 2021 involved a DCA. DCAs were used by some lenders and some dealers, not universally. Whether your agreement was affected depends on:
You may not have been told at the time whether a DCA was involved. Most customers were not, since disclosure of the specific commission structure was not always required under the rules that existed before January 2021. This is part of what the FCA review is examining.
If you are unsure whether your agreement was affected, the first step is to contact the lender directly and ask whether a DCA was used in arranging your finance. Lenders are required to provide this information on request.
If you believe your car finance was arranged using a discretionary commission arrangement and you paid a higher rate as a result, you can raise a complaint with the lender who provided the finance. You do not need to pay anyone to do this. The process is:
You do not need to use a claims management company to pursue a DCA complaint. The process is available directly to consumers at no cost. Claims management companies typically take a percentage of any redress you receive as their fee, which reduces the amount you keep.
The FCA has published guidance on the review and what to expect at fca.org.uk. The Financial Ombudsman Service publishes its approach to motor finance commission complaints at financial-ombudsman.org.uk.
For any car finance agreement taken out after January 2021, discretionary commission arrangements are banned. Dealers and brokers who arrange finance on your behalf must disclose that they receive a commission, and the commission structure cannot be linked to the rate they offer you.
This means you have the right to know that a commission is being paid. Under FCA rules, the arranger must tell you:
Knowing this lets you assess whether the deal being recommended to you is the most suitable option or whether you should compare alternatives.
When you arrange car finance directly with a lender rather than through a dealer or broker, there is no arranger receiving a commission from the lender. The interest rate you are offered is the rate the lender calculates based on your circumstances and affordability, with no adjustment for a third party's commission.
AutoMoney Trust is a direct lender, regulated by the FCA (FRN 912573). When you apply with us, there is no dealer or broker involved in the rate-setting process. Our apply for car finance page starts with a soft search eligibility check that does not affect your credit file. For more on how our hire purchase product works, see our guide on hire purchase car finance with AutoMoney Trust.
If you have a car finance agreement you are struggling to afford, whether or not commission disclosure is relevant to your situation, there are options available. See our guides on voluntary termination of car finance and voluntary surrender of car finance for the routes available if you want to end an agreement early. Free debt advice is available from StepChange and National Debtline if you need support with your wider financial situation.
If you want to know more about commission in car finance or need help understanding your agreement, your first step should be to contact your finance provider or reach out to your hire purchase (HP) car finance lender for more information. They must explain how your deal was arranged and whether commission was involved.
If you’re worried about affordability or feel the deal was unfair, you can also get support from free advice organisations like Citizens Advice or MoneyHelper . Knowing the facts about commission can help you feel more confident and in control of your next UK car finance decision.
When you are introduced to AutoMoney Trust through a broker or dealer, the broker may receive a commission for arranging your finance. UK regulation requires that this is disclosed before you sign your agreement, and the amount or method of calculation should appear in the documents you receive. AutoMoney Trust uses fixed-rate commission structures that do not increase your interest rate based on the broker's earnings. If you would like to understand how commission may apply to your specific hire purchase agreement, check the pre-contract information or contact us directly.
If you fall behind on payments, AutoMoney Trust will contact you to discuss your situation. Continued missed payments can result in default interest, reminder letter fees, and a record on your credit file for up to six years. If arrears remain unresolved, the agreement may be terminated and the vehicle could be repossessed, though under UK law, once you have paid one-third of the total amount payable, we need a court order to take the car back. You may still owe money after repossession if the resale value does not cover the outstanding balance. For support, visit our Existing customers page or contact us early to avoid this.
Car finance can affect your credit score in both directions. Consistent, on-time payments build a positive credit history and may improve your score over the life of the agreement, demonstrating to future lenders that you can manage credit responsibly. Missed or late payments have the opposite effect, they are reported to credit reference agencies and can lower your score, making future borrowing harder or more expensive. Applying for finance also creates a hard credit search, which may cause a small short-term dip. Settling your agreement in full further strengthens your credit profile. For more detail, read our guide on Credit Checks for Car Finance.
A fixed rate keeps your interest rate and monthly payments the same throughout your agreement, giving you predictable costs from start to finish. A variable rate can rise or fall during the term, usually tracking the Bank of England base rate or the lender's standard variable rate, which means your payments can go up or down. AutoMoney Trust offers fixed interest rates only, so you know exactly what you will pay each month. Fixed rates provide certainty but may start slightly higher than introductory variable rates; the trade-off is protection from future rate rises. For more detail, read our guide on What Is Car Finance APR?.
