If you took out car finance before January 2021, you might have been overcharged. Here’s how to complain and apply for compensation.

Until 2021, car dealers could decide your interest rate

Before it was banned on 28 January 2021, some car dealers and credit brokers were allowed to decide the interest rate you’ll pay. They earnt more money if they sold you a higher interest rate, known as a discretionary commission arrangement. This means many could have been mis-sold car finance, including:

• Personal Contract Purchase (PCP), and 
• Hire Purchase (HP).

But this doesn’t apply to car leasing – also called Personal Contract Hire (PCH). 

The Regulator is investigating potential widespread mis-selling

Thousands have already complained that they might have overpaid, but most have been rejected by lenders. To help, the Financial Conduct Authority (FCA) has launched an investigation to see if firms have done anything wrong – and whether complaints are being managed fairly.

The idea is to tell lenders how to handle these complaints and the best way for them to hand out any compensation owed.

While the FCA works this out, lenders don’t need to reply to new (and some recent) complaints. This is currently due to last until the end of September 2024, but it’s still worth complaining now.  

You could be due compensation

Firms must charge you fairly, so you should get compensation if finance has been mis-sold. This is often calculated on a case-by-case basis, but could include:

• a refund of your repayments
• goodwill payment, and 
• interest on top.

The FCA could decide to tell firms how to work this out, depending on the outcome of their investigation.

How to complain

Before complaining, it’s worth checking any paperwork you have (like a finance agreement) to see if it mentions commission, and to check it was taken out before 28 January 2021. 

Some car finance would have been sold with no commission, or a fixed commission unrelated to the interest rate you got. If you’re not sure, still complain to your lender. It’s free to do and up to them to investigate your case. 

Here’s how to make a new complaint:

1. Gather any information about your car finance. You can usually complain within three years of noticing something was wrong, or six years of being sold the finance. 
2. Complain to your lender, ideally in writing. Tell them you think you’ve been overcharged and include as much information as you have.Citizens Advice and MoneySavingExpert have free template letters you can use. 
3. Your lender will review your case and provide a final response, including what they will do to put things right. They currently have until 20 November 2024 to do this.  
4. If you’re unhappy with the final response, or they don’t reply in time, you have 15 months to take your complaint to the free Financial Ombudsman Service (FOS).So you don’t miss the deadline, it's worth setting a reminder before the 15 months is up. 
5. The FOS will give you an independent decision on whether your lender’s response was fair or if they need to do more.  

Don’t pay someone to manage your complaint

Think carefully before using a company to make your complaint.  They’ll usually take a large chunk of any compensation you receive and follow the same process you could easily do yourself.

If you’ve already complained

Tens of thousands have already complained, but most of these have been rejected by lenders.

This is the main reason the FCA has stepped in to investigate. If you’ve already accepted an offer or the Financial Ombudsman Service (FOS) has sided with the lender, you won’t be able to complain again (unless you choose to go to court). Otherwise you have more options.

Complaints before 17 November 2023

If you complained before 17 November 2023, your lender had eight weeks to give you a final response. 

If the lender hasn’t responded in time, or you’re unhappy with the response, you can take your complaint to the free Financial Ombudsman Service for an independent decision. 

For final responses issued between 12 July 2023 and 20 November 2024, you have 15 months from the date it was sent to take your complaint to the FOS. 

This gives you extra time to see the outcome of the FCA investigation before taking your complaint further. 

Complaints between 17 November 2023 and 10 January 2024

If you complained between 17 November 2023 and 10 January 2024 and are unhappy with your lender’s final response, you can take your complaint to the free Financial Ombudsman Service for an independent decision. 

But you might want to wait to see the outcome of the FCA investigation first. You have 15 months from the date the final response was sent to take your complaint to the FOS. If you haven’t received a final response, the usual eight week deadline for your lender to reply has been paused. 

Instead, they should explain what’s happening and how your complaint is affected, under current timelines, the latest you should hear back is 20 November 2024.

If you took out car finance after 28 January 2021

You can still complain if you have a problem with car finance taken out after 28 January 2021. You’ll just follow the normal complaints process and standard timeframes.