A growing number of UK drivers may soon be part of the country’s next major compensation scandal. The focus this time isn’t payment protection insurance (PPI)—it’s car finance.
Between 2007 and 2021, millions of drivers took out finance deals to buy cars, vans, and motorbikes. Many of these included undisclosed commissions, where dealers received extra payment for increasing the interest rate. The practice was banned in 2021, but the financial impact is still being felt.
Now, the Financial Conduct Authority (FCA) is reviewing how these deals were sold. Claims are already being filed. Some experts say it could rival or even surpass the PPI scandal in scale.
What Was the PPI Scandal?
PPI was a type of insurance sold alongside loans, credit cards, and mortgages. It was meant to cover payments if you became ill or lost your job. But in many cases:
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It was added without consent
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It wasn’t needed
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It didn’t actually protect the buyer
The result? Millions were mis-sold a product they didn’t want or understand. From the late 1990s until the early 2010s, banks and lenders sold PPI aggressively.
The FCA eventually intervened. The fallout was huge. More than £38 billion in refunds were paid out to customers.
How Car Finance Compares
While the product is different, the car finance issue follows a similar pattern. Customers trusted a dealer to offer a fair loan. But many were unknowingly charged higher interest rates because of dealer commissions.
The key points:
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Dealers had freedom to adjust interest rates on finance
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Higher rates meant more commission for the dealer
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The buyer paid more—without knowing why
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These commissions were often not clearly disclosed
This system created a clear conflict. And the costs to buyers were hidden in their monthly payments.
Why It’s a Big Deal
From 2007 to early 2021, discretionary commission arrangements were common. They were used across the UK, by both large dealer networks and small independents. Lenders and brokers both benefited.
Many of these deals involved popular finance products like:
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Personal Contract Purchase (PCP)
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Hire Purchase (HP)
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Lease-Purchase agreements
It’s estimated that over 10 million agreements may be affected. Some drivers overpaid by £1,000 to £5,000, depending on the loan size and duration.
What the FCA Is Doing Now
In early 2024, the FCA launched a review into how lenders handled complaints related to commission-based mis-selling. This includes whether customers were told about commissions and how interest rates were set.
Depending on the outcome, the FCA could:
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Order mass redress (refunds)
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Set up a claims scheme
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Recommend changes to how firms handle complaints
The findings could lead to billions in payouts, especially if the FCA finds a pattern of harm like it did with PPI.
Is the Car Finance Boom the Next PPI?
The scale is smaller—for now—but growing quickly. While PPI covered many financial products, car finance has a focused group of victims, mostly drivers who financed vehicles over 14 years.
What makes this similar to PPI:
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High volume of affected consumers
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Lack of clear disclosure
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Pressure-based sales tactics
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Significant financial harm
What’s different:
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PPI was added to a loan; car finance was the loan
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The car finance issue involves interest manipulation, not just unnecessary insurance
Some legal experts already call this “PPI 2.0”, pointing to the scale of early claims and the public interest it’s gaining.
Who Can Claim?
You may qualify if:
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You financed a car, van, or motorbike between 2007 and January 2021
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The loan type was PCP, HP, or similar
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You were not told about the commission the dealer received
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Your interest rate was possibly increased without explanation
You do not need to still have the vehicle or all paperwork. Most lenders can retrieve your details.
The average compensation is currently estimated at £3,000 to £4,000, but this can be higher depending on your agreement.
What to Do Now
If you think you were affected:
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Contact your finance provider
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File a formal complaint
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Use a regulated claims firm if needed
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Escalate to the Financial Ombudsman Service if your claim is denied
Important: Avoid companies asking for upfront fees or promising guaranteed results. Always check they are registered with the Financial Conduct Authority.