A landmark UK court ruling has sent shockwaves through the motor finance industry. The decision exposes the hidden commission practices used in Personal Contract Purchase (PCP) car finance deals. Thousands of UK consumers may now have grounds to claim compensation.
What Are Hidden Commissions in PCP Deals?
PCP is one of the most popular ways to finance a car in the UK. Lenders offer finance deals where the monthly payments cover depreciation rather than the full car value. However, many agreements included undisclosed commissions paid to brokers or car dealers.
These hidden commissions often led to inflated interest rates. Car buyers were unknowingly paying more than necessary. The Financial Conduct Authority (FCA) has been investigating these practices for years.
What Did the UK Court Rule?
The recent court case involved a claimant who challenged a lender over undisclosed commissions. The judge ruled that the finance provider had a duty to disclose commissions impacting loan terms. Since this information was withheld, the customer was misled.
The ruling means that lenders and brokers must be transparent about commissions. Any past deals with hidden fees could now be challenged. A flood of compensation claims may follow.
How Many People Are Affected?
According to FCA data, nearly 40% of UK car finance agreements involve commissions. A 2023 investigation found that commission-related overcharges cost consumers £300 to £1,000 per deal. If you financed a car on PCP, you could be owed money.
In 2019, the FCA banned discretionary commissions, which allowed brokers to set higher interest rates for bigger payouts. But millions of older agreements still contain hidden charges. The latest ruling strengthens consumer claims against unfair lending practices.
How Do You Check If You Were Affected?
- Look at your PCP finance agreement and check the interest rate.
- Request a breakdown of commissions from your lender.
- Contact a claims specialist or financial ombudsman if you suspect hidden fees.
- If you had a Black Horse PCP deal, you might have grounds for a Black Horse PCP claim. Many customers with these agreements were unaware of hidden commissions.
The FCA advises checking agreements from 2010 to 2021. If a commission was not disclosed, you might have a case for a refund.
How to Claim Compensation for Hidden Commissions
- Gather your finance documents – Request copies from the lender if needed.
- Write to your lender – Ask for full commission disclosure and challenge unfair charges.
- File a complaint with the FCA – If the lender refuses, escalate the case.
- Seek legal advice – A solicitor can help you recover overpaid interest.
Consumer groups predict that UK lenders could face over £10 billion in compensation claims. Similar to the PPI scandal, claims could take years to resolve. Acting early gives you the best chance of success.
What Should You Do Next?
If you bought a car using PCP finance, check your agreement now. You could be entitled to thousands of pounds in refunds. The ruling is a major win for UK consumers against unfair lending practices.
